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The McCain health care plan
Mr. McCain’s health plan centers on eliminating the tax breaks for employers who provide health insurance for their workers — a marked departure from the current system — and giving $5,000 tax credits to families to buy their own insurance. His goal in shifting from employer-based coverage to having people buy their own policies is to encourage competition and choice, and to drive down the costs of health insurance.
Here is more. Portability is good but so many of the uninsured families do not pay $5000 in taxes. Will this boil down to a subsidy to those who don't need it or to health insurance vouchers? InTrade says there is a 39.6 percent chance we will find out. And here is some vagueness:
Mr. McCain proposed that the federal government work with the states to cover those who cannot find insurance on the open market. With federal financial assistance, states would be encouraged to create high-risk pools that would contract with insurers to cover consumers who have been rejected on the open market.
Here is more detail; in part it sounds like revived HillaryCare (part I), but only for the high-risk cases rather than for the entire population. The "notches" problem is obvious as people at the relevant margin hold out for the subsidized pool, thereby making the pool size larger and larger.
McCain also emphasizes lifestyle as a factor behind health; that's empirically important -- more so than health care -- but after cutting various stupid subsidies the government should not be the main driver there. Megan McArdle comments overall.
Trade aside, so far I've yet to see many actual policy proposals from the McCain camp. Mostly I've seen attempts to signal that they won't do anything too offensive to the party's right wing. Very few of these trial balloons seem to be ideas that McCain had expressed much previous loyalty to. I don't even think we should be analyzing these statements as policy proposals. We should be wondering why the Republican Party has given up on the idea of policy proposals.
Posted by Tyler Cowen on April 29, 2008 at 08:37 PM in Medicine | Permalink
Comments
Here's what was said in the conference call:
http://race42008.com/2008/04/29/mccain-unveils-health-care-initiatives/
"Even so, those without prior group coverage and those with pre-existing conditions do have the most difficulty on the individual market, and we need to make sure they get the high-quality coverage they need. I will work tirelessly to address the problem. But I won’t create another entitlement program that Washington will let get out of control. Nor will I saddle states with another unfunded mandate. The states have been very active in experimenting with ways to cover the “uninsurables.” The State of North Carolina , for example, has an agreement with Blue Cross to act as insurer of “last resort.” Over thirty states have some form of “high-risk” pool, and over twenty states have plans that limit premiums charged to people suffering an illness and who have been denied insurance."
Doesn't really sound like HillaryCare at all. It's quite a federalist approach. McCain is saying that he won't tell the states to no pay for the uninsurables' health care. Well, fine with me...
Posted by: Alana at Apr 29, 2008 9:46:14 PM
"We should be wondering why the Republican Party has given up on the idea of policy proposals."
Realism. An incoming Republican president will be facing a strong, hostile Democratic congress. The main objective of President McCain will be to moderate and rationalize the policy proposals coming out of Congress, not to initiate his own.
Needless to say, I think this arrangement will be better for public policy overall compared to a Democratic President and a supplicant Congress, but your mileage may vary.
Posted by: Mario at Apr 29, 2008 9:49:13 PM
"We should be wondering why the Republican Party has given up on the idea of policy proposals."
You're kidding, right? I'll take "Softballs" for $1000, Tyler.
Perhaps because they realized:
(a) the more specific you are the more people can criticize you,
(b) nobody with less than a graduate degree understands the specifics on most issues
(c) nobody with less than a college degree cares about specifics, and certainly not as much as they say care about them,
(d) they are not penalized in any meaningful way, such as losing elections, for not providing specifics,
(e) most Republicans don't care about specifics because it implies the government *doing something*, which is anathema to Republicans c.2008 (see: the dismantling of FEMA prior to Hurricane Katrina; the whole planning for the aftermath of the war in Iraq by everyone in the administration except career State Dept folks who had no say in policy anyway), and
(f) having specifics implies having an understanding and interest in resolving the problem, which the Republican Party and its elected officials do not have, at least not at the federal level.
Posted by: RSaunders at Apr 29, 2008 10:09:44 PM
Will this boil down to a subsidy to those who don't need it or to health insurance vouchers? InTrade says there is a 39.6 percent chance we will find out.
Um, no. This assumes a 100% chance that if McCain is elected he'll push for a plan similar to this to Congress. Let's face it, the only reason McCain has a health care plan is because he's expected to have a health care plan; I'm guessing it won't be a high priority in a McCain presidency. This is basically, "Okay, guys, I have a health care plan; can we talk about something else now?"
Posted by: Hei Lun Chan at Apr 29, 2008 10:36:37 PM
http://nathanbenefield.blogspot.com/2008/04/mccains-health-care-plan.html
Tyler Cowen asks a few questions and claims that this is new ground for McCain, but that is more due to Cowen not having paid attention until now, and relying on Politico for his information (watching McCain's ad alone would have answered Cowen's first question, as McCain emphasizes the word "refundable" tax credit).
Posted by: Nathan Benefield at Apr 29, 2008 11:56:18 PM
Of course with median family healthcare costs around $12,000, it won't go very far, which is probably what is intended.
Posted by: Lord at Apr 30, 2008 2:34:59 AM
I've been wondering about the lack of proposals and initiative from the McCain camp as well and, because of this, I have been questioning the prevailing assumption that McCain is benefiting from the continued Democratic nomination fight (apparently along with at least one other person; Division of Labour: "McCain on Clinton-Obama"). While this whole battle has been raging and Clinton/Obama have been all over headlines, for better or worse, McCain has hardly seen any press at all. He could be using this time to send out trial balloons and policy proposals, as Tyler suggests, to build a solid platform, but he seems to be doing nothing of the sort, or at least nothing of interest to the press. I don't profess to be any sort of genius political mind, but I just can't see how McCain's current obscurity and lack of any sort of platform works in his favor. Maybe the rumors that McCain has a terrible organization underneath him are correct.
By the way, I totally agree with Hei Lun Chan's assessment of McCain's healthcare plan. I'm sure discussing his own plan is probably one of the last things McCain would like to do.
Posted by: effay at Apr 30, 2008 3:16:04 AM
McCain isn't a policy guy. I don't think "stay the course" is a strategy, it's who he is. Not that his advisors can't trick him into a good idea now and then. If we wanted a bold policy guy we should have nominated you know who.
Why get rid of employer tax breaks? Why not just add personal tax breaks and add tax breaks for people who want to donate coverage to other individuals?
I still don't get the shock that people with pre-existing conditions are denied insurance. Insurance is a risk adjuster. A pre-existing condition is a certainty. They aren't denied insurance, they are denied a handout. Are they denied treatment? Letting pre-existings get insurance at the same premium as if they didn't have a condition isn't fair to other members of the insurance pool.
But, there are ways to manage this. How 'bout instead of insurance for pre-existing, encourage loans to them. Provide generous tax breaks for donors. Legalize payments to kidney donors (on balance this might reduce costs and will definitely increase productivity of those on dialysis).
We need to get our heads around the fact that a person shouldn't be allowed to bankrupt everyone just because some genius developed a super-expensive medical treatment.
I have GoldenRule catastrophic, a paid-for house, and an @$$load of cashish. It's really not that hard. My only healthcare problem is the terror that once I need it these jacklegs will have mucked it up. I'll be forced to pay other people to get in line in front of me.
Posted by: Andrew at Apr 30, 2008 3:18:27 AM
I noticed at this link:
http://money.cnn.com/2008/03/10/news/economy/tully_healthcare.fortune/
This comment
"McCain is targeting community rating for good reason. It forces the young and healthy to pay far more than their actual cost by making them subsidize the elderly and sick. Like the mandated benefits, it's pushed millions of Americans in their 20s to drop their health insurance."
True?
I've been calling BS on the "uninsured crisis" for a while. In my opinion, young people are often perfectly rational to go without health insurance as it is. Wouldn't it be great if a Clinton/Obama mandate plan was the last straw between younger voters and the liberal democrats?
From McArdle:
"The senator is proposing one thing that I think is a terrible idea, pharmaceutical reimportation. Naturally, this is the part of his health care plan with the highest probability of passage."
Reimportation is a joke. I'm all for price discrimination, but why should arbitrary government borders support it? But, since it is a joke and won't do much damage, that's why you use it as the carrot to get the camel's nose under the tent. That's political economics. Give something that doesn't cost you anything to get something valuable. McCain doesn't have to pass anything he doesn't agree with. So, if I were McCain, it wouldn't pass without being tied to something substantive.
Posted by: Andrew at Apr 30, 2008 3:57:22 AM
Oh yeah, and McCain doesn't know much about economics :)
Someone send him a link.
That tripped me out. It's like a guy trying to become a preacher admitting he doesn't know much about the bible. Pick up a book you twit! I mean, you don't even have to know much to fake out the plebes. And if it piques your interest, Ron Paul will be glad to give you a reading list.
But, at least he's honest. That's a plus.
Posted by: Andrew at Apr 30, 2008 4:02:37 AM
Andrew,
The reason you need to drop employer tax breaks is because with them, insurers have too many incentives to ignore the individual market. The incentives are 1) people with jobs are generally healthier than people without (so by "strategically" focusing on the "group"/employer market, you can discriminate without discriminating); 2) one sales process, multiple insurance premiums (seemingly reducing sales costs per contract, though I think this is a red herring given the innovation in, say, car insurance sales techniques); 3) an easy "out" for denied claims - "well, the policy your employer bought for you doesn't cover that" (instead of "the policy our agent sold you isn't the right one for you" and the potential liability that opens up); 4) save money educating the population on health insurance "details" (have you ever actually read the gory details of your employer provided policy? Most people haven't. Why bother? Health insurance is a "checkbox" when comparing jobs opportunities. Few people evaluate the quality of the employer-provided policy. Ever.)
To have a robust individual market, eliminating the employer-based market is at least an important consideration, if not an outright necessity.
Posted by: Richard at Apr 30, 2008 6:49:02 AM
After all those articles I`ve read about the health care issue I think that Hilary`s universal health care is the most objective one. Not because of the fact that I`m working for a Toronto life insurance company I think that health insurance is an essential thing to have in our age. The other question is that how it would be realized. As in other countries as well a greater pressure should be put on health education, it could solve a lot of problems in my opinion.
Posted by: life insurance broker Toronto at Apr 30, 2008 8:01:43 AM
After all those articles I`ve read about the health care issue I think that Hilary`s universal health care is the most objective one. Not because of the fact that I`m working for a Toronto life insurance company I think that health insurance is an essential thing to have in our age. The other question is that how it would be realized. As in other countries as well a greater pressure should be put on health education, it could solve a lot of problems in my opinion.
Posted by: life insurance broker Toronto at Apr 30, 2008 8:02:40 AM
I don't even think we should be analyzing these statements as policy proposals. We should be wondering why the Republican Party has given up on the idea of policy proposals.
Realism? Detailed presidential candidate policy proposals are usually pie in the sky.
Sense? Why are revolutionary "policy proposals" desirable every four years anyway? Has that mainly brought prosperity, or churn and uncertainty?
Posted by: holmegm at Apr 30, 2008 8:55:00 AM
It's silly to have detailed policy proposals when you don't control either house of congress.
Posted by: Chris at Apr 30, 2008 9:43:00 AM
Can anybody tell me how McCain's prosposal compares to Romney's in Massachusetts? And how Hillary's and Obama's differ from Romney's?
Posted by: massrepublican at Apr 30, 2008 9:58:46 AM
I would think he was proposing something like the earned income credit... which is actually essentially welfare for single moms to the tune of 3-5000 a year.
Otherwise the program is very stupid, since most poor families don't come anywhere near paying 5k a year in taxes or even having it withheld.
Posted by: Toxic at Apr 30, 2008 10:14:31 AM
Richard,
Thanks for the points. I agree with the end objective. I'm just wondering if the employer-payer link could die gracefully.
I'm no expert on insurance. I can't stand the stuff so I try to think about it a little more than I think about taxes.
It just seems like taking away my $9k tax break through my employer and giving me a $5k tax break directly is not an even trade. Plus, doing it all at once would choke the fledgling individual market, no? Short term prices would rise well beyond the $5k.
Posted by: Andrew at Apr 30, 2008 10:17:11 AM
Who needs policy proposals when the left is self destructing? Better to say nothing at all, and be the only candidate left who hasn't offended anyone.
Posted by: Doug at Apr 30, 2008 1:44:06 PM
McCain's speech accomplished a great deal. He showed that he wants health care to go in a fundamentally different direction than Dems. He adopts their goals, but not their means.
Consumer choice/control/responsibility vs governmental with tax breaks to help with the costs.
Portability via switching the tax break from companies to consumers.
National insurance market.
Special case the chronically ill.
These alone make for a fundamental rationalization of the system that will cascade to improvements in cost, quality, (over)utilization, and more by attacking the moral hazard of third-party payments.
The details that economists live by aren't important at this stage, not least because no proposal on anything as large and fraught as health care can become law without big compromises and endless refinements.
In this area as in so many areas, McCain represents a difference, not a mere distinction.
Posted by: Larry at Apr 30, 2008 3:57:22 PM
Even without tax breaks, employers will always have an advantage purchasing health care plans than individuals, it's called buying in bulk. That's why Dell pays less for its Windows licenses than you do, it's why WalMart pays less for toothpaste and why Costco is cheaper per unit than your corner grocery store. The employer link will likely never die, unless mandated by law.
Andrew,
Dems didn't always have an advantage in the youth vote. in 1992, 18-29 year olds were 50-50. Since the Clinton administration, the Republicans have been bleeding the youth vote and it accelerated under Bush.
Posted by: Mo at Apr 30, 2008 4:01:18 PM
It might be interesting to see doctors start taking cases on a contingent-fee basis, like attorneys do - it would arguably do a better job of aligning the interests of the doctor and the patient (goal = a cure). A doctor could take on any case and agree that he doesn't get paid unless the patient is cured, at which point he would make a substantial sum (i.e. the cost of the entire treatment, plus a healthy profit for assuming whatever degree of risk is involved). Obviously this would only work with ailments that have a definite end, but a per-treatment arrangement would still be available for the more risky patients and/or those with on-going conditions. Also, might raise collection problems for the doctor, but perhaps they can get the patients to pay a "retainer" up front.
That said, if they really want to reduce the costof healthcare, they should be busting the AMA monopoly on med school admissions.
Posted by: 12345 at Apr 30, 2008 4:04:14 PM
The tax credit is refundable. So it does not matter what your tax liabilbity is.
Posted by: John goodman at Apr 30, 2008 4:59:09 PM
The ideas on this site are among the most creative attempts on the web.
Yes let's reduce barriers to licensing physicians and surgeons and also cosmetic surgeons and psychiatrists and the rest. That will really save us money. Let’s have more of the people who generate the charges. That will control costs. NYC is wall to wall with medical professionals and medical facilities. That’s why medicine there is so cheap and especially cheap for the taxpayers to pay most of the bills.
Considering the concensus of this site why don't you also endorse open immigration for health care professionals, and would-be health care professionas, and pretend health care professionals. That will save us big time. I can tell since the biggest tract mansions in my are are owned by South Asian medical types.
Considering the consensus of this site, why don't you also endorse open immigration for health care professionals, and would-be health care professionals, and pretend health care professionals. That will save us big time. I can tell since the biggest tract mansions in my neck of the woods are owned by South Asian medical types.
Posted by: thissiteissofunny at Apr 30, 2008 6:00:58 PM
McCain's health plan would affect me personally since I receive good benefits from my employer who would probably be only to happy to jettison the health care expense. The $2500 tax credit is not near the total expense of what a company pays per person for health care. That is a hidden expense which is not being mentioned.
Posted by: Dan at Apr 30, 2008 8:20:06 PM
