Analyzing the Mc Cain and Obama Health Care Reforms
Over the past several weeks I have spent a lot of time examining health care proposals. Over the last several years, I have similarly spent a great deal of time reading and commenting on health care, especially as it affects the elderly.
With this in mind, commenting on the McCain and Obama health care proposals is inordinately difficult since there is so much to say. Still, it would be cowardly to avoid a subject that is so central to both campaigns. Health care and how to pay for it are the bread and butter of what I do.
Here, with all of its limitations, is a summary of problems and possibilities I see in these plans.
The McCain Health Care Reform. Of all the comments made by experts and commentators, the most consistently held is that the McCain plan would decouple payment for health care from employer based health care insurance. This is a radical change that might not happen immediately but would, almost certainly occur over time. Here is why.
The McCain Plan would for the first time tax health insurance benefits that are currently received by employees tax free. To offset this, it would also offer a tax credit of $2,500 per person or $5,000 per family regardless whether the consumer received health care insurance through his or her employer. This would make employer-based health insurance less attractive since taxable to the employee and would give a tax benefit to those who do not have employer coverage.
To see how this system would work, employees should first investigate how much their employers pay for their health care coverage. They might be shocked. It is not uncommon, for instance, for family health care insurance premiums to cost upward of $12,000 per year. Note, however, that the $5,000 per family is a tax credit, a dollar for dollar offset against taxes, which is more valuable than a tax deduction. Here are some other points.
Personal Responsibility. The movement to separate health insurance from employer based coverage is part of the “personal responsibility” campaign.
The idea is that each consumer will, when confronted with multiple choices, bargain for the best choice with the health insurer. Personal responsibility assumes that individuals have bargaining power. That assumption might be challenged when considering the immense wealth and influence of health insurers as opposed to the relatively slim bargaining position of individuals.
Insurers, of course, need policyholders but they could bargain for the youngest and healthiest, leaving older and sicker applicants either without coverage or paying extremely high premiums. This problem could be accentuated by another aspect of the plan which is to allow health insurers to offer plans across state lines thereby allowing insurers to set up their plan in a State with minimal regulation. For these reasons, under the McCain plan more young, healthy workers who do not currently receive employer based coverage may receive coverage but there may be greater problems for older and chronically ill applicants.
Retiree Health Insurance Benefits. One issue unaddressed anywhere is the question what would happen to retiree health insurance benefits if employer coverage is discontinued. In discussing this with an accountant, the comment was that, of course, it would not make sense to continue retiree health benefits where employees are not unless the employer is otherwise legally obligated.
If employee health insurance benefits continue and would be taxable to the employee, would retiree health insurance benefits similarly be taxable to retiree recipients and would they receive the tax credit? The debate over the cost of Medicare would likely complicate the answer. For many retirees and their widows and widowers, employer subsidized health insurance is one of the most critical benefits they receive and answers on these subjects would be needed.
The Obama Health Care Plan. The Obama health care plan would prop up current employer subsidized programs. As to small employers, it would offer an additional Small Business Health Tax Credit. For larger businesses that do not offer health insurance coverage it would charge a payroll tax to the employer.
Those who do not have health insurance coverage would be able to buy into coverage through a National Health Insurance Exchange with benefits similar to benefits now available to federal employees.
While the McCain plan focuses on the individual, the Obama concept focuses largely on the bargaining power of groups. Bargaining for lower drug costs, preventative care, more accountability from insurance companies, and requiring coverage for preexisting conditions form the centerpiece of the program.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.