Why You Should Give McCain Some Credit On Healthcare

If you're an entrepreneur, freelance whatever, writer, blogger, young, whateverer, you should take a minute to consider the appeal of McCain's healthcare proposal. McCain wants to eliminate tax deductions for worker-sponsored health insurance, and then offer a tax break for one's own health care expenditures. Obama has called that a tax hike, and it seems that slamming McCain's health insurance plan will be a key part of his closing argument.

But you should stop and think what this is all about: It's about unmooring healthcare and stable employment. For a lot of folks, employee-sponsored health insurance is a key aspect of career choices. Because it's so difficult to buy health care on the open market, a steady boring job at a large firm is a necessity -- you might want to drop out of that, do a startup, be a filmmaker, an artist, travel for 6 months, etc., but if having healthcare is critical (for me it's pretty important), then you really don't have that luxury or flexibility.

There's really no reason that health insurance and employment need to go together, either. The whole notion (I believe) was started in WWII, when there were price controls. Large employers wanted a way to pay their employees more, so government offered them a loophole (surprise!): Save on taxes by making part of their compensation be health insurance. Also not surprisingly, that wrinkle in the tax law stuck around. Over time, the effect has been to crowd out the health insurance open market for individuals.

Now for a quick econ lesson: If your employer stops offering you health insurance, it won't reduce the value of your total compensation. It just means that the (say) $6000/year that goes to health insurance will go to your actual salary. Another perspective: If you're an employer, you don't really care what mix you compensate employees in, you just know that you'll allocate, say, $85,000 per year in some mix of cash, insurance, payroll taxes, 401(k) contributions etc.

Again, I'd suggest that for a lot of people who might be peers of mine, this type of scheme (and the job flexibility this allows) should be appealing to them. And overall, if you think (like I do) that promoting entrepreneurship and worker mobility is vital for the economy, this is a key part of making that happen.

Of course: Obama supporters will wish this away, and say Obama is promoting some form of universal health care coverage, making this irrelevant. Perhaps. But realistically, this isn't likely to go through, especially with our current budget difficulties. And even if you do think Obama's vision is realistic, it's still not very helpful to frame McCain's proposal as a tax increase. It's a good idea, as he's hit upon a key structural flaw in our healthcare system

Comments

[wcw]

Yes, attaching medical insurance to employment is stupid. Detaching it from employment without attaching it to any larger grouping is insane. Belief that medical care is amenable to market forces is not to McCain's credit. It betrays a fundamental misunderstanding of how markets work, of their virtues, and of their flaws.

[Rhys Southan]

Hopefully Obama will read this and take McCain's idea. Otherwise, this entry could backfire and give McCain the election, which nobody in America wants.

[Andrew Schmitt]

Agreed 100%, McCain's health proposal is the best thing he has going.

We need to have a real market for health insurance with M's of individuals. People also need to be aware of the costs. I buy my own insurance for my family, as do you I guess. It is not cheap.

Add in high deductibles to control consumption and rollback the 'mandated' coverage areas (in-vitro fertilization is covered in some states - that is crazy) and we are getting somewhere.

[Andrew Schmitt]

I should add that the chances of all this happening are precisely zero.

[me]

I really love how you overlook the fact that diabetics like me, cancer patients like McCain or Elizabeth Edwards, cannot buy insurance at any price.

You also conveniently omit the fact that McCain will cut Medicare and Medicaid to pay for his tax cuts (per Holtz-Aiken).

And I never figured how a 5 grand tax cut paid for a 12 grand policy, if you could get the insurance.

No, give me that crappy government health care that McCain, and apparently you , rail against, but that McCain hasn't been WITHOUT for ONE day since he was born.

[Joseph Weisenthal]

"And I never figured how a 5 grand tax cut paid for a 12 grand policy, if you could get the insurance."

Because the other $7,000 would come from increased pay, as your employer re-allocates the money they spent on health insurance towards normal salary.

See here:
http://rossdouthat.theatlantic.com/archives/2008/10/the_missing_7000.php

[me]

"Because the other $7,000 would come from increased pay,"

Yeah, just like Starbucks lowers the price of coffee when beans fall.

[me]

And I forgot Joe, if you were correct, then when companies took away the pensions, they would have given everyone raises. That did not happen and we have gone from 2/3 comvered by a pension to less than 40%, and wages have stagnated. Nice academic theory but not true in reality.

[Skinny]

Joe,

Thanks for writing about health insurance from a freelance/young person perspective.

As a freelancer I would like affordable insurance that isn't tied to one employer but I'm with "me" on this one. I think portability and tax deductions for the self-employed are appealing but I don't want to leave everyone who has pre-existing conditions or tight incomes out of the loop, nor do I want to undermine insurance coverage for people who are covered by their work.

Have you taken a look at Obama's support for a health insurance market place called a Health Insurance Exchange. My impression is that the Obama campaign isn't too serious about it and that HIEs might undermine employer coverage.

Also aren't there now Health Savings Accounts. How does McCain's plan differ from an HSA? Would McCain's plan actually be worse than an HSA because instead of you controlling the money it goes DIRECTLY to the insurance company?

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The major stock averages had another dramatic day of swings yesterday, the Dow reversing from down 380 in the morning to close up 401 points. The averages finished just shy of their highs of the session and the NASDAQ Composite led the way.
Stocks briefly rose at the opening, then reversed lower as a plunge in the October Philly Fed index (reported -37.5 v. estimated -10) and disappointing reading on September industrial production (reported -2.8% v. estimated -0.8%) weighed heavily. Follow-through selling from Wednesday was also a likely factor adding to the pressure on stocks.
The measures of fear again reached record levels in the morning plunge. The CBOE Volatility Index, the VIX, and the CBOE NASDAQ 100 volatility indicator both rose to new intraday all-time highs of 81.17 and 84.62, respectively. Stocks steadily slid to their late morning lows. At that point, the DJIA was down 380 and the NASDAQ 62 point and the internals of the market were overwhelmingly negative for both the NYSE and NASDAQ.
From the lows, the Dow rallied more than 500 points in an hour, gave back 200 points from their early afternoon peaks and settled into narrow ranges. A late acceleration sparked another 500-point rally up to the close. With the stock market successfully holding onto to their gains, the VIX and NASDAQ Volatility indexes eased back into their closes. The broad market finished solidly positive. Volume picked up substantially from the previous day's low levels.
Today - Volatility will also rise as a significant amount of options expire in a triple-witching session. The opening looks lower.
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[Terry B. Brauer]

The McCain-Palin Health Care Plan will ensure that Americans pay more for insurance premiums, higher deductibles, increased co-pays and more out-of-pocket expenses if Senator McCain is elected President on November 4, 2008.

A McCain-Palin election will green light employers to slash benefits, shift more costs to employees, and result in the taxing of employees' healthcare benefits paid by their employers for group plans.

McCain's proposed tax credits offered to families and individuals are absurd. Tax credits for $2500-$5000 do not begin to cover the costs of $7000-$14000 annual premiums + co-pays, high deductibles, and other out-of pocket expenses.

There is nothing substantive in the McCain-Palin healthcare plan to restrain runaway inflation in healthcare costs.

Growing the free market will result in further cost escalation and proliferate the delusion of competition. Today, insurance products are comparably priced and increasingly unaffordable.

Obama-Biden's Health Care Plan is more substantive and is highlighted by the prospect of a public insurance plan.

Ultimately, his plan will evolve to a cost-control driven remedy with less insurance industry abuse, fraud, and unjust enrichment for the healthcare industry.

Profit and overhead costs for multiple payers and the opportunities a de-centralized system affords to excessive utilization should be sufficient to inspire common sense policy-makers and employers to change course.

Obama's plan is more conducive to addressing our healthcare access, cost, quality and patient safety crises.

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