McCain’s Health Care Fix Modeled After Failed Banking Industry

by Seth Michaels, Sep 22, 2008

Sen. John McCain wants to change our health care system—by modeling it after crisis-ridden banks.

No joke (but we wish it were)!

In the latest issue of Contingencies, the magazine of the American Academy of Actuaries, McCain’s campaign submitted an article, under McCain’s name, about his health care plans. In it, McCain says the best way to fix health care is to make it more like the finance industry. 

Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation. 

That’s right. McCain is so impressed by the performance of the deregulated, consumer-last banking industry that he proposes we let them do to our health care what they’ve done to our homes, credit cards bills and investments.  In short, McCain wants to build health care reform on the same corporate giveaway framework on which he and his advisers helped build the current financial crisis: Corporations can act without any restraint, and consumers are completely on their own.  

The consequences of McCain’s health care plan would mean that while millions of working families would be paying a new tax on their health benefits, millions more would be dropped from their existing coverage entirely. Families would be left with no health care coverage, facing an insurance industry unregulated and all too willing to offer confusing, expensive policies that offer inadequate, expensive coverage. 

A new study conducted by four economists for Health Affairs puts a concrete number on how many of us would lose under the McCain plan. The authors estimate that 20 million people could lose the health coverage they now have under McCain’s plan, but acknowledge that, with 160 million receiving coverage through their employer, the effects could be even more devastating. McCain’s plan would give employers an incentive to drop coverage and push workers into the private market. 

We note, however, that the effect could be much larger. Studies suggest that many employers would be quick to drop health benefits in response to a major policy change, such as the McCain plan, that greatly altered the business case for offering benefits. Also, as we note above, these estimates account only for the price effect of eliminating the tax preference; they do not account for the number of low-wage workers who might lose employer-sponsored insurance when employers are no longer bound by the nondiscrimination rules, nor do they capture the impact of breaking up existing risk pools. 

A study of corporate benefits officers in the corporate-friendly BusinessWeek magazine backs up the Health Affairs research, suggesting that a McCain-style health care tax plan would have a strongly negative effect on employers’ ability to provide their workers with health coverage. The benefits officers say their workers could wind up with less-comprehensive coverage or no coverage at all.

And where will these newly uninsured workers end up? In the overpriced, inefficient, bureaucratic and consumer-unfriendly private insurance market, which the nonpartisan health care advocacy group Families USA describes as a “far inferior option,” and the Health Affairs study says “would not save money for most Americans.”  That’s right. McCain’s plan would take away what millions of workers have now and leave them on their own, at the mercy of the insurance companies. McCain even wants to roll back regulations on these insurance companies even further, giving them more leeway to hike prices and deny coverage and care. In the private market, you can be turned down for a pre-existing condition, or really any health issue that could cost insurers money. McCain would actually decrease protections for consumers, making it even harder to get care. That’s great for insurance company CEOs and their lobbyists, but it’s a lousy deal for everybody else.

And, of course, McCain’s plan wouldn’t have much, if any, effect on the 46 million people who have no health coverage at all. Looks like he agrees with his sometime adviser, John Goodman, that there’s no such thing as the uninsured.

And let’s not forget the new tax burden on working families at the heart of McCain’s plan. In the latest issue of The Hill, Steelworkers President Leo Gerard points out how McCain’s tax rhetoric and corporate tax cut agenda hides the fact that he’s proposing a tax hike that will hit working family budgets hard.

He is actually proposing a brand new tax on the middle class. This has gotten so little attention it is astounding. And frightening, frankly.…

McCain intends to tax workers for the value of health insurance that they receive from their employers.

It’s no wonder that New York Times columnist Bob Herbert calls McCain’s health care agenda “radical” and a “toxic formula” for health care. Ezra Klein at the American Prospect describes health care under the McCain plan as “more expensive, less comprehensive, and less secure.”

Last week, the Wall Street Journal ran a column by three economists, one an adviser to Sen. Barack Obama’s campaign, on why Obama’s health care plan will strengthen the economy.

Sen. Obama’s proposal will modernize our current system of employer- and government-provided health care, keeping what works well, and making the investments now that will lead to a more efficient medical system.

While Obama’s plan would let families who are satisfied with their existing coverage keep it, it also allows a number of other options—letting individuals and small businesses join cost-effective large insurance pools, including a robust public plan. By extending coverage to more people, encouraging preventive care and updating health care technology, Obama’s plan would lower costs for working families. Lower health care costs will take a lot of pressure off families getting squeezed in this economy.

Jonathan Cohn of The New Republic says Obama’s plan is an investment in a stronger economy.

Anybody who has no health insurance, has too little health insurance, or has health insurance that might not be around tomorrow will benefit from Obama’s health care plan.… 

What’s more, creating a universal health system—or even moving towards one…would be good for the economy. It would help put in place mechanisms, like institutions that scrutinize new treatments for effectiveness, that would help tame runaway medical spending. It would let people move more freely from job to job, which should—at least in theory—allow them to maximize their productive potential. And it would provide businesses with a great deal more predictability about their employee health costs, something most corporate executives would appreciate. 

We know how we got into this financial crisis. Investment banks operated without the benefit of oversight, without restraints on greed, and millions of consumers were left unprotected, at risk of losing their homes and savings. McCain, in his own words, wants to make the health care system more like the banking system.

That’s the choice before voters on the issue of health care. Do we want to raise taxes, demolish coverage for millions and empower insurance companies at the expense of patients? Or do we want to expand access to affordable, high-quality health care to everyone?

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