"McBush Care" - No Good For What Ails You

This post from The Swamp, the political blog of the Chicago Tribune, jogged my memory a bit on the matter of the health insurance proposals of Barack Obama and John W. McBush (and a hat tip goes out to SG for the article I’ll cite later from Money Magazine).

The Swamp post tells us…

McCain, for example, would eliminate favorable tax treatment for employer-sponsored health insurance and provide individuals with tax credits of $2,500 per person or $5,000 per family to buy insurance. He would promote competition among the insurers by allowing people to choose insurance companies outside their state.

Obama, on the other hand, would require all children to have health insurance and would require employers to offer health benefits to workers or contribute to the cost of a new public plan. He would expand Medicaid, which provides health coverage to the poor and the disabled, and he would expand SCHIP, the children's health insurance program.

That provides some explanation, but this Money Magazine article tells us (concerning McBush)…

(The elimination of the tax break employees receive if their employer provides coverage) may not sound like a shocker, but it is. The exclusion dates from World War II, when the federal government imposed controls on wages, but allowed companies to compete for workers by offering tax-free health benefits in lieu of pay. The law is largely responsible for the nightmarish patchwork of corporate-provided medical plans we enjoy so much today. Employees and their unions demanded richer and richer packages, and employers complied, since they could buy far more benefits for their employees than workers could buy with after-tax dollars on their own. Americans have paid a steep price, however, by sacrificing their raises as corporate insurance bills exploded, never more so than now.

The phrase “nightmarish patchwork of employer-provided medical plans,” the dig about employees “demand(ing) richer and richer packages” (any sign of complaint about CEOs awarded “richer and richer” compensation?), and the silly speculation that, without that tax break, employees would not have had to “sacrifice their raises” are tipoffs that this article is geared towards the “wealth” perspective (as are later references to the “Democrat proposals” and the “Democrat plan”).

And here’s another tipoff (if you can relate to this “hypothetical,” then good for you - I can't)…

McCain suggests that we junk all that. Say you're earning $100,000 a year and your company provides about $9,000 toward your $12,000 family premium, which is about average. Today you're taxed only on the $100,000. Under McCain's plan, you'd also pay on the $9,000. That could mean an extra $3,000 or so in federal taxes alone. To compensate for the extra levy, McCain would provide a $2,500 federal tax rebate for individuals and $5,000 per family, meaning a family would simply subtract $5,000 from its tax bill, the equivalent of a big cash payment.

However…

Here's where it gets interesting. Employers would no longer be able to buy more health care with $9,000 of their employees' money than the workers could buy on their own. The raison d'être for corporate health benefits would vanish. Employers have another compelling reason to pass the ball to the employee: While wages are rising around 3% a year, their health-care costs are growing at three times that rate. "I predict that most companies would stop paying for health care in three to four years," says Robert Laszewski, a consultant who works with corporate benefits managers. Hence, an employer that pays $9,000 for your benefits would simply pack an extra $9,000 a year into your paycheck. (Why? Because in a competitive labor market, companies would have to hand over that cash to employees or risk losing them.) So you'd have $6,000 after tax, plus the $5,000 family credit, to buy insurance. That's $11,000 in new cash that employees can set aside for health care.

I for one am not going to buy into this con that supporting something like this, absent anything bearing even a slight resemblance to a government run or cosponsored plan, will automatically mean more money in my pocket. Besides, if employers were so worried about retaining employees, they wouldn’t be looking to dump their coverage to begin with.

(I should note, though, that one of the strongest disagreements with anyone I’ve ever been friends with has been on the matter of employer salary versus benefits, in which he argued that an employee would take more money every time even over questionable bennies. Though he was basically a Republican, he had sound judgment on many other matters, but I thought he was flat wrong here; I will admit, though, that age and family status play a huge role in a decision like that.)

The Money article discusses the Obama plan, whereby if an employer chose to opt out of coverage, they would have to pay into “a new, government-administered system…swell(ing) the ranks of Americans with government paid health care.”

To which I ask, “And the problem is?”

The conclusion of the Money article is that McBush’s “plan” is better because Money’s precious free market provides employee choice, or something like that, whereas your humble narrator truly believes that that is exactly the reason for the problem we now face; as health care consumers, we are left to bargain for ourselves instead of doing so collectively and utilizing the force of government to stimulate competition in our favor (I seem to recall that that was the centerpiece of the plan from that Edwards guy a little while back).

And even though the Money article compliments McBush, it raises a dire specter under what could take place if his plan were to become law...

...under the McCain plan, states with no restrictions - Pennsylvania, for example - could sell policies for 25-year-olds that cost around $1,200 a year, one-third the price in New York. Young New Yorkers would drop their plans in favor of Pennsylvania providers, forcing New York insurers to jack up premiums for people in their 50s or early 60s, who need those rich, community-rated plans that cover as many procedures as possible - but who no longer benefit from the excessive premiums paid by the youngsters. It gets worse. Anyone with cancer, diabetes, or other pre-existing conditions will see their premiums multiply too.

What Obama proposes is the equivalent of “Take two of these and call me in the morning.” However, what McBush counters with is something along the lines of “Bend over and say 'Aaahh'.”

Update 8/27/08: Hat tip to Avedon Carol for this; haven't made it all the way through yet, but it looks interesting.