Back in April 2004, I wrote (on Political Animal, comments now lost, but preserved on Respectful of Otters):
Practically speaking… at the moment the health system in the US, insofar as it exists, it set up on the basis that your employer will pay for your health insurance. If every employer in the US simply decided that from now on the money they paid to subsidize employee health insurance was to go to their shareholders instead, and people would only have health insurance if they could afford to buy an individual plan, then the US would suddenly face a health care crisis the like of which it’s never seen: not just 45 million people without health insurance, but probably more like 250 million. The whole health “system” would crumble into bankruptcy.
[…]
Wal Mart’s moral obligation to provide health insurance for all its employees arises from the fact that it makes its profits from a system which assumes that all major employers do so. If all major employees imitated its business model, the system would collapse and kill hundreds of thousands.
This was in response to a story Rivka had published earlier about Wal-Mart’s paying many of its employees so little they cannot afford Wal-Mart’s health insurance plan:
So imagine my surprise when someone came into my office today who has a full-time job. She works 40 hours a week at Wal-Mart. Like many of their employees, she can’t afford their health insurance plan. Even if she could, they wouldn’t cover her HIV care because it’s a pre-existing condition. It isn’t even about paying for the drugs, which are expensive – she qualifies for the state AIDS Drug Assistance Program, which picks up all of her prescriptions for her. Wal-Mart won’t pay for office visits to an HIV specialist, and they won’t pay for the blood tests she needs to monitor her condition.
So you, the federal taxpayer, will be paying for her medical care. Today you also gave her $40 worth of food vouchers, because after she pays her rent (which eats more than half her wages, and she lives in a slum) there’s not a lot left over to buy food. I’m sure you’re glad to do it, right? You don’t want her to die.
And you don’t want Walmart’s $8 billion profits and 21.6% return on shareholder’s equity to drop, the way it probably would if the public weren’t picking up the cost of keeping Wal-Mart associates and their children alive. You wouldn’t want any members of the Walton family to drop off the list of the richest people in the world. (Imagine if only four of them were in the top ten.)
Now, four years on, McCain wants to use the Wal-Mart model of health care for all the 71% of Americans with health insurance () who are insured via their employers. Douglas Holtz-Eakin, chief policy adviser for McCain, calculates that over 10 years, the US government will get $3.6 trillion increased revenue from taxing employer-provided health insurance (cite).
To understand this, I use the UK model of national health insurance (figures in US dollars): Supposing you earn $2400 a month, and your employee contributions to health insurance are 11%. (That’s the UK’s national insurance rate, covering health and other benefits.) So you pay $264 a month for your health insurance.
Under the current US system, that $264 is not taxed: it gets taken off your pay before tax, and goes to the employer’s health insurance company whole and entire, along with whatever contribution your employer makes, which contribution is also not taxed: so assuming that your employer matches your contributions to your health insurance (also the rule in the UK system) your health insurance company gets $528 per month to cover you.
Under the system McCain proposes, that $264 will be taxed: $39.6 (federal tax at 15%, at least) will be deducted from it. Furthermore, your employer’s contribution to your health insurance will be also taxed. So unless your employer is willing to increase what they pay, you will need to find about $80 more each month to get the same level of health insurance as before, which is in theory going to be paid for by a tax credit at the end of the year. That’s fine if you have the kind of cash flow that can easily compensate for $80 less each month with a tax credit that will hopefully equate to everything you paid out before: $2500 tax credit voucher if you’re an individual, $5000 if you’ve got family. (And issues about which families will be recognised as entitled to the double tax credit voucher, in states that don’t recognise same-sex couples and their children as “family”?)
Joe Biden described this healthcare plan in the VP debate:
Now, with regard to the — to the health care plan, you know, it’s with one hand you giveth, the other you take it. You know how Barack Obama — excuse me, do you know how John McCain pays for his $5,000 tax credit you’re going to get, a family will get?
He taxes as income every one of you out there, every one of you listening who has a health care plan through your employer. That’s how he raises $3.6 trillion, on your — taxing your health care benefit to give you a $5,000 plan, which his Web site points out will go straight to the insurance company.
And then you’re going to have to replace a $12,000 — that’s the average cost of the plan you get through your employer — it costs $12,000. You’re going to have to pay — replace a $12,000 plan, because 20 million of you are going to be dropped. Twenty million of you will be dropped.
So you’re going to have to place — replace a $12,000 plan with a $5,000 check you just give to the insurance company. I call that the “Ultimate Bridge to Nowhere.
(I see I wildly underestimated the cost of US health insurance. In the UK we pay far less and get better health care, but that’s just how it is.)
Ace of Spaces reports this as (via): “Biden falsely said McCain will raise taxes on people’s health insurance coverage — they get a tax credit to offset any tax hike. Independent fact checkers have confirmed this attack is false.” (This is number 7 in a list of “14 Biden lies”.)
Well, it’s true, while John McCain’s advisor says explicitly that the tax hike on health care insurance payments will raise $3.6 trillion, John McCain’s website makes no mention of tax hikes, the McCain campaign has made clear in media interviews that the plan is to raise trillions by making what your employer pays for your health care a taxable benefit, not an untaxed benefit. I don’t know how Ace’s “independent fact checkers” could have missed the news stories about this back in April and May and June (via): I’d suggest Ace fire them and hire ones who actually know how to use google, but I gathered by googling that this list of “Biden lies” is not even original to Ace, though the funnysite I was looking at for current Republican lies linked to Ace as the originator.
The current American health care system is the worst in the developed world (WHO ranks it at 37*): it’s even worse than health care systems in some developing countries. And it’s more expensive than any other health care system in the world.
McCain’s plan is to make American health care worse than it already is – to throw more and more Americans out of the pool of people who receive health care via their employer’s insurance plans, while giving them a tax break for choosing their own personal insurance plan. Ezra Klein explains why this is not revenue neutral, while Publius at Obsidian Wings points out that this plan just assumes individuals have exactly the same bargaining power as corporations do.
It appears, judging by this much-memed list of “lies”, that the only way Republican wonks can now think of campaigning for McCain is to flatly lie about about what his policies actually are.
*International stats on health care systems below the cut
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