Health Care

Our country has one of the best health care systems in the world, but quality heath care has become increasingly expensive and unavailable to far too many people.   Almost everyone agrees that changes are needed in our health care system, including changes  to make it easier for those who are currently uninsured to obtain affordable health insurance.  There are major disagreements, however, over the role of government in regulating our health care system and in providing health insurance to its citizens.   As in so many other areas, Barak Obama and John McCain are proposing dramatically different solutions to the health care problem.    In a nutshell, Obama wants to expand the government’s existing health care programs, and McCain wants to place the responsibility on individuals, with the help of tax credits from the government, to obtain and maintain their own health insurance. 

It is difficult to analyze the solutions proposed by the two candidates without first examining the cause of many of the problems in today’s health care system.  In my opinion, many of our current problems are the result of extensive government regulation and interference.   For example, one reason health insurance is so expensive is because the states mandate the services and providers that must be covered in each policy.   The result is that many people are required to pay for coverage they don’t need or want.  Congress recently imposed another mandate on the health insurance industry when it adopted legislation requiring all insurers to provide equal coverage for physical and mental illnesses.    As a result of this new mandate, the cost of health insurance will go up for all employers who provide health insurance to their employees and for all individuals who purchase their own health insurance.   Everyone will now have to pay more for this expanded coverage whether or not they want it. 

Another reason for the high cost of health insurance is that people are not allowed to buy health insurance across state lines, which limits competition.   Still another reason is that the tax code arbitrarily provides substantial tax breaks to some people who have health insurance but not to others.   An employee of a company that provides health insurance to its employees is not required to include the cost of the health insurance in his or her taxable income.   But a large number of people are required to purchase their own health insurance with after-tax dollars, including employees of companies that do not provide health insurance, part-time employees, and people who are unemployed or retired.  In short, our current tax policies subsidize the cost of health insurance for some, but not all, citizens.   The people who are hurt the worst are non-skilled and lower income citizens who are unemployed and who do not have health insurance through their employers.  This system is grossly unfair and is a major contributor to the large number of uninsured people.   

Amazingly, having created this grossly unfair system, our politicians are scratching their heads and trying to figure out why so many people do not have health insurance.   Rather than addressing the inequities in the current system, Obama wants to maintain these inequities and at the same time to expand the government’s involvement in health insurance.  His approach relies heavily on more government mandates, regulations and subsidies.   He would require employers to provide insurance for their employees or to pay a penalty equal to some percentage of their payroll for not doing so.   The funds generated by the penalty would go into a national fund to provide insurance to those uncovered workers.   The Cato Institute studied Obama’s plan and concluded that employers will “seek ways to offset the added cost by raising prices (the most unlikely solution in a competitive market), lowering wages, reducing future wage increases, reducing other benefits (such as pensions), reducing hiring, laying off current workers, or outsourcing.    It said “the most likely outcome will be greater unemployment for workers whose lack of skills does not justify the increased cost.”   

Obama also would substantially increase regulation of the insurance industry.   In my view, more government regulations will only drive up the cost of health care for everyone.  Government regulations are responsible for many of the problems we are experiencing today, so why would we want more government regulation?   

Unlike Obama, McCain would rely on the free market to solve the problems in our current health care system.   McCain would change the tax code to level the playing field and treat everyone alike.  He would move away from our current employment-based system to a system where every individual would purchase and own his or her own insurance and would get a $5,000 credit (for families) or a $2,500 credit (for individuals) to be applied against taxes owed.   In exchange for the tax credits, employees who receive health insurance through their employers would be taxed on the value of their health insurance benefit.   Most people with employer-provided insurance would come out ahead under McCain’s plan.   Here is the way it was explained in the November 2008 issue of Kiplinger’s Personal Finance: 

“McCain would change the rules to give everyone a tax break.  If your employer plan now costs $13,000 (about the average for family coverage), counting that amount as taxable income would cost you $3,250 in additional federal taxes.  But families would get a refundable $5,000 tax credit ($2,500 for individuals) to help purchase insurance, either through an employer or an individual plan.  The change could encourage more people to buy individual policies, which they could take with them even if they left their job.  And as long as you keep an individual policy, your insurer generally cannot raise your rates because of your health.” 

The McCain plan would provide individuals with more choices and with more job mobility because workers who purchased their own insurance would not need to stay in a job to keep their health insurance.   The McCain plan would also allow people to purchase insurance across state lines.    Rather than adding new regulations, McCain would deregulate the insurance industry in an effort to increase competition.  

The Executive Summary of the Cato Institute’s study of the health care plans proposed by McCain and Obama contained the following conclusion: 

“Senator McCain’s proposal is far from perfect, but from a free-market perspective, it appears superior to Senator Obama’s plan.   Obama’s plan, with its heavy reliance on government, leads to the same problems that bedevil universal health care systems all over the world:  limited patient choices and rationed care.  McCain’s proposal is much more consumer centered and taps into the best aspects of the free market.” 

Health care experts Robert Moffit and Nina Owcharenko reached similar conclusions after analyzing the Obama and McCain plans for the Heritage Foundation.  They said Obama’s plan would concentrate health care decision-making in Washington and “would likely precipitate a rapid evolution toward a federal monopoly over the health care sector.”    Moffit and Owcharenko said Obama’s top-down plan would result in a "standardized federal health benefits structure, a massive expansion of federal regulatory authority over health insurance, and an enlargement of federal regulatory power over health care delivery."   In contrast, they said McCain’s plan “is underscored by a principled commitment to personal freedom” because it “would advance greater personal choice and control in the health care system.”

As I see it, the Obama plan would be best for those of you who are willing to turn more responsibility for your health care over to the government.  I think the McCain plan would be best for those of you who want to retain maximum personal responsibility for your own health care and who want more choices and greater portability for your health insurance coverage.   For me, I strongly prefer the McCain approach.