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McCain's Health-Care Muddle

What's he doing? Don't ask the media

By Trudy Lieberman

May 1, 2008, Columbia Journalism Review

http://www.cjr.org/campaign_desk/mccains_healthcare_muddle.php

John McCain finally came forth this week with what his
campaign dubbed a major policy speech, laying out his To Do
list for health care reform. We at CJR have been asking a lot
about his plans lately, which up to this point had raised
more questions than answers. Tuesday's address wasn't much
more illuminating. In fact, in some respects, it was utterly
confusing. The Straight Talk Express took a circuitous route,
and the press did not clear things up.

Let's start with McCain's overarching reform-altering the tax
code to begin weaning the public off of employer-provided
health coverage, currently the bedrock of the U.S. health
insurance system. His plan would give workers the option of
leaving their employers' plans and getting a federal tax
credit-$2500 for individuals and $5000 for families-to buy
their own insurance in the commercial market. Leaving aside
the merits of a plan that could eventually lead to the demise
of our employer-based system, a question: How would McCain
pay for that tax credit? Now here comes the confusion. The AP
ran a somewhat muddled story Tuesday that said:

    To pay for the tax credit, McCain would eliminate the tax
    exemption for people whose employers pay a portion of
    their coverage, raising an estimated $3.6 trillion in
    revenues, [McCain adviser] Holtz-Eakin said. Companies
   that provide coverage to workers still would get tax
    breaks. McCain would also cut costs by limiting health
    care lawsuits.

By that account-read our lips!- McCain means that if your
boss pays for part of your health insurance, you will begin
to pay taxes on some part of it, the way people pay taxes on
employer-provided life insurance already. Apparently, the
insurance would be counted as income subject to income taxes.

Meanwhile, would employers-who now can deduct health-
insurance costs as a business expense-still get to do that,
as the AP reported? Or not, as The New York Times suggested
yesterday. The Times reported that Holtz-Eakin said the
government would save that $3.6 trillion over the next decade
by eliminating the tax break that currently goes to encourage
employer-based health coverage. That sounds like eliminating
the the tax break that employers currently get.

But did Holtz-Eakin mean the break to employers, employees,
or both? It wasn't really clear to the casual reader.
Thursday's Times reported that McCain proposed eliminating
the exclusion of health benefits from taxable income for
workers. So maybe that's it. But to get further clarity, we
called the McCain campaign press office (three times). No one
called us back. We looked at McCain's speech, posted on his
Web site. No help there-gobbledygook to most people. Here's
what it said about the tax breaks:

    Under current law, the federal government gives a tax
    benefit when employers provide health-insurance coverage
    to American workers and their families. This benefit
    doesn't cover the total cost of the health plan, and in
    reality each worker and family absorbs the rest of the
    cost in lower wages and diminished benefits. But it
    provides essential support for insurance coverage. Many
    workers are perfectly content with this arrangement, and
    under my reform plan they would be able to keep that
    coverage. Their employer-provided health plans would be
    largely untouched and unchanged.

It's a fair bet that Americans interested in the candidates'
health proposals are thoroughly confused. Many outlets, like
The Houston Chronicle, picked up the AP story, which was
little help. And get this-On Tuesday, McCain's own Web site
ran a story under the by-line of David Jackson of USAToday,
calling it an 'article excerpt.' The excerpt, however,
contained the same paragraph that was in the AP story.

The important thing to know about McCain's plan at the moment
is that either way-by making employees pay taxes on employer-
provided coverage or by no longer allowing employers to
deduct health insurance as a business expense, or by doing
both-it's the proverbial nose under the camel's tent. It's
the beginning of the end of health insurance as we know it,
so what he proposes as a replacement should be very carefully
reported and considered. In McCain's plan, under the banner
of consumer choice, everyone will eventually need to find
insurance on their own in the private market. In his speech,
McCain himself said: 'Millions of Americans would be making
their own health-care choices again.'

This reminds me a lot of what's happening to Medicare. The
push to entice beneficiaries to buy certain kinds of private-
market policies and opt out of traditional Medicare is a
wedge that begins to privatize the program. Encouraging
people to opt out of their employer health coverage does the
same thing-it makes people fly solo when it comes to their
health insurance. Is that what American workers want?

The tax part of McCain's health proposal is radical, far more
radical than his rivals' plans. Most of his other proposals
are less extreme. Some, in fact, have been tried before, and
the press should take a look at the results. The media need
to begin asking the hard questions, and soon. Stay tuned.
We'll work through some of those questions next week.

[Trudy Lieberman directs the health and medical reporting
program in the graduate school of journalism at City
University of New York, and is a longtime contributing editor
to Columbia Journalism Review. She is covering the health
care debate during the presidential campaign for CJR's
Campaign Desk.]

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