Recently, health-care has resurfaced as a prominent issue in the presidential campaign largely because the Democratic candidates, Senators Barack Obama and Joe Biden, have launched a coordinated and sustained assault on Senator John McCain's proposal to expand health insurance coverage with refundable tax credits.
In several campaign ads, such as this one, and during the televised debates, the Democratic ticket has tried to scare voters by suggesting the McCain plan would increase their costs and “unravel” job-based coverage for millions of workers. And during Tuesday night's debate, Senator Obama again claimed that his plan would allow workers to stay with their employer plan if they like it and that households who already have insurance coverage would save, on average, $2,500 per year from his plan.
The aggressive attacks on the McCain plan have certainly dispelled the notion that Democratic presidential candidates engage only in positive campaigning. But what's really remarkable about the Democratic assault is that their claims and charges are demonstrably false. And it's not just the McCain campaign saying so.
Over the past month, three independent assessments of the candidates' plans have been issued from nonpartisan organizations: the Tax Policy Center, jointly run by the Urban Institute and the Brookings Institution (full report available here); The Lewin Group health consulting firm (full report available here); and Health Systems Innovation, another consulting practice (two separate studies available here).
Neither the Tax Policy Center nor Lewin is known for being friendly to market-based health-care reforms. Still, even their findings expose the Obama-Biden health-care assertions as deceptive at best.
For starters, the Obama-Biden campaign has tried to create the impression that the McCain plan would leave households worse off than they are today. Their ads mention that the McCain plan would “tax health benefits for the first time ever.” Senator Biden took it a step further, stating during the debate between the vice presidential candidates that the McCain plan “would replace a $12,000 health plan with a $5,000 check.”
This statement is of course intended to leave voters with the impression that they would lose $7,000 under the McCain plan, which is a complete distortion. Today, when an employer pays $9,500 for family health coverage (which is closer to the true average), that's $9,500 that can't be paid to the worker as cash wages. Exempting that $9,500 health premium payment from federal income tax is worth a lot less than $5,000 for most workers. For instance, for a couple in the 25 percent marginal tax bracket, it's worth $2,375. The McCain plan would give that couple $5,000 instead of $2,375. Moreover, with the tax credit in place, it doesn't matter if the employer continues to pay for premiums or gives the worker cash income instead. Either way, the worker will come out ahead. The Tax Policy Center estimates that the average household would enjoy a $1,200 boost in income from the McCain plan.
Then there's the accusation that McCain's plan would unravel job-based insurance coverage. All three recent studies show the McCain plan reducing the number of uninsured even as coverage through the workplace remains the norm.
HSI estimates the McCain plan would expand insurance coverage to more than 27 million people, or more than half of those currently uninsured. Much of this coverage would come from individuals using the tax credit to buy into the non-group market, but HSI believes even employer-sponsored coverage would expand, not contract. Lewin does forecast job-based coverage would decline by about 9 million people, but that would still leave nearly 150 million American in job-based plans under McCain's reform plan — a far cry from “unraveling.” Lewin expects the McCain plan would lead to a net reduction in the uninsured of over 21 million people.
Senator Obama is trying to appear like the moderate in the health-care debate, claiming he would “build on” today's employer-based coverage and not push the country toward a government takeover. But, again, the independent assessments of his plan reveal an entirely different picture. Lewin sees the Obama plan increasing enrollment in government-run insurance by nearly 50 million people, including almost 19 million who would be switched from employer coverage to a government-run insurance plan at the discretion of the employers, not the workers.
Senator Obama has claimed for more than a year that his reform plan will reduce costs by $2,500 per household for those with insurance today. But the Tax Policy Center sees average savings of just $780 per household from the Obama plan. And he wouldn't get those savings if he weren't relying on artificial price controls to keep costs down. Senator Obama says his plan will slow cost escalation by improving prevention and information technology. But the truth is that millions of American would end up in government-run insurance with fee limits for doctors and hospitals.
Indeed, Lewin anticipates large migration from employer coverage to public insurance under the Obama plan because the government-run insurance will keep premiums artificially low with price controls. Over time, more and more employers would find it better to pay a tax to the government than to organize insurance themselves. It would be just a matter of time before the Obama plan led to a full government takeover and the real risk of access restrictions and queuing.
The most pressing issue in health care is rapid cost escalation. To his credit, Senator McCain has put the most credible proposal in a generation on the table to address the problem with market forces. Senator Obama's implicit solution is to give the government the power to call all of the shots, although he will not admit this to voters before the election.