I was having a discussion today with a friend about McCain's health plan, and its purported goal of breaking the link between employers and health care provision. This is a good thing to do, but I'm not sure it will happen. I suspect that if the McCain plan passed (a damn slim chance), what you'd see is a benefit going to some of the more affluent self-employed, while most people continue to purchase health insurance from their employer with their now-individualized tax subsidy.
The problem is, because of the subsidies, the market for individual insurance is very thin, and the market for employer insurance is extremely well established. There's also a very strong social expectation of getting insurance from your employer. Removing the subsidy might eventually create a more robust individual market, but at the very least, I expect it will take a really long time.
Ignoring institutional inertia is a general problem with policy theorizing. It's certainly not limited to libertarians--all the liberals I hear talking about national health care seem to imagine it being implemented in a magic fairyland where the AMA and the AHA have not developed gigantic lobbying arms in order to more effectively siphon cash from Medicare. This enables them to design a perfect system based on cherry picking their favorite features from each European country, rather than working on the assumption that whatever we get in the future is probably going to look very much like what we already have.
It is good to develop ideal frameworks--I certainly have a lot of my own. But the problem with shiny, perfect framework is that it's easy to become so dazzled with it that you ignore the actual political landscape in front of you. It takes a hell of a scorched earth battle to get that space clear enough to build from scratch.
As a person with a condition that frequently requires surgery, say every other year, my only question is how am I going to get coverage, which fortunately I have now. If that question remains unanswered, the plan has a snowballs chance of passing because it makes McCain look like an idiot, because the marry a rich lady plan is not universally available.
From what I can tell, Senator McCain proposes to give every individual a $2500 (or $5000 for married couples) refundable tax credit to be used to purchase health insurance while allowing them to put any surplus into an HSA. Note that the tax credit goes to everyone even if you get insurance through your employer. If you don’t use it to buy an individual policy (which I agree would be ideal) and it goes into your HSA, then that means that you can apply it to things like co-pays, deductibles and the cost of any unreimbursed care. Which would make policies that have higher co-pays and deductibles (and hence lower monthly premiums) more affordable for more people.
Also it’s not certain what change he would make to the tax treatment of employer-sponsored health insurance – would it no longer be deductible as an expense or (as seems more likely) is he proposing to put a cap on how much an employer can deduct for their employee’s health care coverage to deal with cases where they offer more “gold-plated” policies to their more highly compensated (read: executives) employees? The later was what President Bush and other supporters of delinking health insurance from employment have proposed and also BTW what Senator Clinton has proposed in her health care proposal (who favors the employer-based model but favors a cap on the deduction).
So it seems to me that the effect of McCain’s proposal (and I agree it would not be enough to delink health insurance from employment) would be to make it easier for some people to buy their own health insurance policy (such as the self-employed) and make it easier for employers to offer health insurance with lower premiums that has higher deductibles and co-pays by giving a tax credit to the employees who have to pay more out-of-pocket costs (which they’re doing now) while capping the tax subsidy that tends to disproportionately benefit wealthier workers who tend to have more generous coverage by their employers.
If the McCain plan were to pass Congress and work as intended, employer based medical insurance benefits would vanish and married couples would receive a $5000 tax benefit. Insurance for husband, wife, and two children now runs in excess of $12,000 per year on the average. Unless the McCain plan includes a big tax refund for insuring children, passing it means that a family with four children would be out several thousand dollars annually. Of course employers dropping their insurance burden might compensate their employees with generous pay raises, but I think the probability of this happening is close to zero. So the net result of McCain's plan would be a tremendous disruption of people's lives as they scramble for insurance and a financial loss of several thousand a year. It's a real winner, isn't it?
Unless the McCain plan includes a big tax refund for insuring children, passing it means that a family with four children would be out several thousand dollars annually. Of course employers dropping their insurance burden might compensate their employees with generous pay raises, but I think the probability of this happening is close to zero. So the net result of McCain's plan would be a tremendous disruption of people's lives as they scramble for insurance and a financial loss of several thousand a year. It's a real winner, isn't it?
On the contrary, uncoupling health insurance from employment is a great idea. An even better idea is having individuals write checks to cover their own health insurance.
Health care costs skyrocket because people don't know the true costs. Paying the full whack for one's own health insurance will remove a huge market-distorting effect("it's free!"). Removing the health insurance deduction from employers will certainly cause temporary dislocation, but long term benefits. Whose employer offers auto insurances as a benefit? Further, coupling health insurance to employment impedes employee mobility - surely not a recipe for optimally efficient allocation of labor.
Employers got out of the pension business by switching everyone over to 401K plans. Couldn't something similar be arranged to provide for the demise of employer funded health care? Require that new employees show that they're enrolled in a qualified health plan? Provide a certain amount of support, shrinking year by year, for whatever insurance the employee obtains? Surely there is some sort of reasonable transition path that employers would be motivated to follow. If the government would de-clutter the path, whatever one they choose, I'm sure the employers would love to de-emphasize that responsibility. They might even pay the employees more for the opportunity.
it makes McCain look like an idiot, because the marry a rich lady plan is not universally available.
Well that's the problem. Any candidate offering to make the "marry a rich, [attractive] woman plan" universally available would get my vote.
I understand why you are obligated to cover the McCain plan (and Obama..... and Hillary....), but why not set aside some posts to look at the Wyden-Bennett plan -- one that is much more practical, and frankly, more interesting (ah yes, and will likely more resemble and large-scale health care reform that appears in reality...):
http://tinyurl.com/4nhtvx
one thing to remember is that where you work can dramatically affect what type of medical care you will need. Using individual companies as pools rewards companies with low claims cost and penalizes those with high claims costs. This is more effective than govt regs because inspectors can be bought.
Removing corporate management from the health care loop may not be a good thing.
Meagan, you are right on the money with this post.
An interesting argument to make to liberals, it to point out that our Medicare and Medicaid spending is already as much as almost every other country spends on their health care per capita. If government is so great, why not just make Medicaid more efficient, and then expand it into universal health care without spending any more money?
I must be getting cynical with my age, because after the various factions are finished putting their muddy paws all over a health care bill, I fully except it will make the system even worse.
"Whose employer offers auto insurances as a benefit?"
They would if the person receiving it didn't end up having to pay tax on it as income. In fact the company car used to be a more common perk before employees were forced to pay income tax on it.
Essentially, any income an employer can transfer tax free to the employee benefits both.
"Health care costs skyrocket because people don't know the true costs."
Health care costs have skyrocketed because we refuse to say no to expensive end-of-life care that does little to extend life quality or quantity. I don't think people head to the doctor just because they want to use up their insurance. Unless we're willing to tell people "sorry you don't get that treatment, it's not worth the money to extend your life by 1-month" like European countries do then we'll continue to spend a lot of money for little reward.