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Both McCain And Obama Offer Health-Insurance Headaches

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The Tampa Tribune

Published: September 29, 2008

The contrasting approaches to health insurance proposed by Sens. John McCain and Barack Obama each comes with more costs and unpleasant side effects than either candidate predicts.

The nation must do better.

Their similar goals of helping more people get affordable health care should remain the target for reform. But rushing to fix some problems could easily cause bigger problems, including higher premiums to customers, widespread confusion and higher taxes.

Uncovering Workers

McCain's plan would gradually undermine the existing employer-sponsored approach, which is working well for most of those in the system. He wants to tax health-insurance benefits, though doing so would give the nation a big push toward an every-family-for-itself approach.

With tax incentives gone, it would be in the financial interest of most employers to stop being a health-care middleman.

McCain's faith that market competition would cover more people at lower costs overlooks several realities. One is that administrative costs are higher for individual plans than for group plans; those costs would have to be passed on to individuals.

McCain promises his plan would put "individuals and families back in charge." The reality is, profit-motivated insurers would continue to price the chronically ill out of the market. Groups could form voluntarily, but the best deals would go to the healthiest groups.

People shopping for the best policies in a national market, free of state oversight, would face a bewildering array of co-pays, deductibles, nonparticipating doctors, excluded medicines, uncovered treatments and various restrictions. And because McCain would eliminate state-required safeguards, consumers would have to read the fine print of every policy with a lawyer's eye.

Lower prices and fewer rules, as we've learned in the financial crisis, aren't always in the nation's best interests.

Though he would tax employer-provided health-care benefits, McCain also calls for a tax credit of $2,500 per person or $5,000 per family, which would cover less than half the cost of a typical insurance policy. Those without workplace insurance might be potentially better off, but most would likely remain uninsured. It's hard to see how his plan would help the 180 million Americans who now get health insurance through their employers tax-free.

By taxing benefits and providing a tax credit to cover less than half of the cost of a typical health plan, McCain would eliminate a major incentive for employers to provide group plans.

But McCain is right on one point. As he says, "The road to reform does not lead through Washington and a hugely expensive, bureaucratic, government-controlled system."

Americans don't want higher taxes, fewer choices and rationed care.

Leaning On Uncle Sam

Obama's approach is to give the federal government a much larger role. He would help more people get health insurance, but at high costs and with uncertain side effects. He would use government subsidies to cover some of the uninsured and require most employers to provide a basic level of coverage or pay a tax to help cover the uninsured.

Under Obama's plan, national insurance similar to Medicare would be made available to those who can't get their own coverage. If the premiums are cheaper, everyone will want in. If not, the people who need it won't be able to afford it.

Obama also would set up a new government entity called the National Health Insurance Exchange to make sure things like mental health treatment and preventive care are included in insurance policies. It is hard to predict where those mandates would end.

Obama's universal plan wouldn't permit insurance companies to deny coverage or increase prices based on pre-existing medical conditions, which is bound to raise costs for the healthy. The federal cost of handing out income-related tax credits would be covered by raising taxes on those earning more than $250,000 a year.

Insurance companies would be so tightly regulated that it's hard to see how they would compete.

Neither candidate's plan is particularly appealing. But whoever becomes president will be forced to deal with a demographic shift. The population is aging, and each year more people are added to the roles of Medicare. They will increase the pressure for more benefits from a federal government increasingly unable to pay.

Medical technology continues to improve, a trend that both saves lives and raises costs.

Voters need to be aware that whether you prefer Obama's bigger-government approach or McCain's market solution, it's unrealistic to expect unlimited access to better health care at lower costs.

Only when leaders are more honest about the tradeoffs will Congress be ready to make fundamental improvements.

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