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Policy Positions Re: HEALTH CARE

THE JOHN MCCAIN HEALTH PLAN

Most health policy analysts believe that Sen. McCain is proposing the most fundamental health care reform, says John C. Goodman, president of the National Center for Policy Analysis.

• Right now the federal government primarily uses the tax system to encourage private health insurance -- handing out more than $200 billion in tax subsidies every year.
• Sen. Obama would leave this system largely intact.
• Sen. McCain would completely replace it with a fairer, more efficient system with a much better chance of both insuring the uninsured and controlling health costs.

Under the McCain plan:

• Employers could no longer buy insurance with pretax dollars.
• Such payments would be taxable to the employee, just like wages.
• However, every individual would get a $2,500 credit (and every family would get $5,000) to be applied dollar-for-dollar against taxes owed.

The McCain plan does not raise or lower taxes. Instead, it takes the existing system of tax subsidies and treats everyone alike, regardless of income or job status. All health insurance would be sold on a level playing field under the tax law, regardless of how it is purchased.

The impact would be enormous, says Goodman:

• For the first time, when purchasing health insurance low- and moderate-income families would get as much tax relief as the wealthy.
• People who purchase their own coverage would get the same tax relief as those who obtain it through an employer.
• Whereas Sen. Obama would continue the current practice of giving the vast bulk of federal help to the rich (through tax subsidies) and the poor (through spending programs), the McCain tax credit would give the most new tax relief to the middle class.

Source: John C. Goodman, "The John McCain Health Plan," National Center for Policy Analysis, Brief Analysis No. 629, September 5, 2008.

For text:

http://www.ncpa.org/pub/ba/ba629/


THE BARACK OBAMA HEALTH PLAN

Sen. Barack Obama has released only sketchy details about his health reform plan. The Commonwealth Fund has produced a very detailed plan, however, which it encourages readers to view as very similar to Obama\'s. Thus, one can assume the Commonwealth plan details apply where Obama has been vague, says John C. Goodman, president of the National Center for Policy Analysis.

• The Obama plan would impose a "pay-or-play" mandate on all employers -- taxing those who do not provide health insurance for their employees.
• Following Commonwealth, one can assume this would be an additional tax of 7 percent on payrolls -- up to $1.25 per hour per employee -- imposed on employers who fail to pay at least 75 percent of their employees\' premiums for a minimum benefit package.
• Were this provision enacted today, it would immediately affect the 40 percent of small employers who do not offer coverage, the 30 million people in families who have at least one worker but no health insurance, and millions of Medicaid enrollees who have some workforce connection -- to say nothing of all the employers who currently pay less than 75 percent and/or have plans that are insufficiently generous.

As the economic literature affirms, a payroll tax is almost completely borne by workers themselves. During the Democratic Party primary, Sen. Obama criticized Sen. Clinton\'s proposal to mandate coverage by asserting she would try to force people to buy something they cannot afford and then tax them when they don\'t buy it -- leaving them worse off than they were. Exactly the same criticism applies to Obama\'s pay-or-play mandate, explains Goodman.

A tax on labor (or mandated labor benefits) makes employment more expensive. It encourages employers to hire fewer workers, adopt labor-saving technology, employ part-time workers, and outsource labor to independent contractors and other entities, says Goodman.

Source: John C. Goodman, "The Barack Obama Health Plan," National Center for Policy Analysis, Brief Analysis No. 628, September 5, 2008.

For text:

http://www.ncpa.org/pub/ba/ba628/