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Washington, DC – While John McCain’s health care plan is often described as modest and incremental, in fact it makes far-reaching changes to our health care system. He would replace the current tax breaks for employer-sponsored health insurance with an across-the-board tax credit of $2,500 for individuals and $5,000 for families. McCain would deregulate private health insurance by creating a “national market,” letting insurers locate themselves in states with minimal regulations and preventing states from being able to protect their own citizens.
As a result, the McCain plan would radically change the health insurance market, asking Americans buy health care plans on their own with few regulations or consumer protections. There are praiseworthy elements in McCain’s plan, such as making tax benefits for health premiums more progressive than they are today, recognizing the need for health coverage independent of work, and emphasizing chronic care. However, on balance, the plan is likely to make the health system worse than it is today. The key highlights, or lowlights, are:
1. The McCain Plan Would Cause Millions To Lose their Health Benefits: Most Americans – 158 million people – receive their health care through their job. The McCain plan eliminates the tax exclusion for employer-provided health insurance coverage so workers would pay taxes on the value of their health benefits.
2. It Expands the Dysfunctional Individual Insurance Market: The McCain plan shifts workers to the individual insurance market, which often fails to prevent insurers from refusing to cover pre-existing illnesses like cancer, denying coverage outright, or engaging in other discriminatory practices. The purpose of insurance is to share risks across a community, but insurers competing in the individual market often find it easier to cut premiums by covering only healthy people.
3. 56 Million Chronically Ill Adults Are Particularly At Risk: People with chronic diseases – who need insurance most — are particularly at risk from McCain’s plan. Employers do not charge these workers higher premiums, but insurers selling individual policies usually do – if they cover them at all. There are 56 million non-elderly adults with employer-sponsor health insurance who have at least one of twelve chronic illnesses (this figure does not include children).
4. McCain’s High-Risk Coverage Pools Will Be Inadequate: Today, McCain is proposing spending $7 billion a year to subsidize high-risk pools for people who could not obtain health insurance elsewhere. While Democrats’ plans call for creating access for everyone to be able to purchase the health insurance they want, the McCain plan would limit the choice of people with preexisting conditions to a national high-risk pool. To develop his plan, McCain said that he would draw on the experiences of the more than 30 states with experience in high risk pools. The experience from the states is one of high costs and limited benefits.
5. The McCain Plan Gives Too Little to Low-Income and Sick Families: Despite making tax breaks more progressive, the McCain plan does not go nearly far enough to make insurance affordable. With average family premiums exceeding $12,000, a $5,000 per family tax credit is simply insufficient. This would be especially true in high-cost areas and for people with high-cost diseases. McCain would also undermine the guarantee of affordable coverage for millions of low-income children and families currently enrolled in Medicaid. He would encourage states to experiment with replacing Medicaid coverage with private insurance, or providing alternative forms of access to care.
6. Raises Health Care Costs. McCain’s plan relies on insurance competition to lower costs, but it is more likely to lead insurers to avoid risk rather than lowering costs. Shifting millions of households into the individual market would raise administrative costs. In addition, the savings from prevention, chronic disease management, and reduced cost shifting cannot be achieved in a gap-ridden coverage system. That’s why – as Brookings scholar Henry Aaron has pointed out – universal coverage is a necessary first step to bringing costs under control.
7. It May Raise Taxes on Average Families Buying Health Insurance: Current health care tax benefits grow with premiums (expected to be about 6 percent a year). The McCain campaign has not released many details of its health care plan, including how it would adjust the health care credits over time. However, it is modeled off a Bush Administration proposal that plan capped the growth of credits at the rate of inflation (about 2 percent a year).
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