McCain’s health care plan risky

Quick test: Which presidential candidate offers the most radical new approach for health care coverage in the United States?

If you listen to the spin-meisters denouncing universal health care as “socialized medicine,” you’d answer Democrat Barack Obama. But by far, the most radical plan belongs to John McCain. The Republican candidate would essentially destroy the foundation on which the current health insurance system is based and replace it with a dubious plan to let the marketplace work its magic.

“Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade with banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation,” McCain wrote in a recent issue of the magazine of the American Academy of Actuaries, the people who determine your rates for, among other things, health insurance.

In other words, if you like what free-market conservatives have done for the banking and finance industry, you’ll love what they have in mind for health insurance. McCain’s plan would put the health of many citizens at risk. It would also exacerbate the vicious cycle of the uninsured seeking care in the nation’s emergency rooms, causing local tax subsidies of public hospitals to rise along with the premiums of those of us with insurance.

Obama’s plan is hardly perfect. At best, it would leave about 6 percent of the under-65 population without any coverage, compared with 17 percent now. But Obama proposes to build on the basics of employment-based insurance, adding requirements to make insurers accept all applicants. Those ideas are, far and away, preferable to McCain’s reckless plan.

As has been the case in presidential elections for nearly three decades, there are stark differences in the Democratic and Republican platforms for health care reform. In years past, Democrats have tended to favor a plan administered by the federal government or the states — not unlike Medicare for the elderly — that would cover all those not covered by insurance on the job.

Republicans, by contrast, decry government sponsorship of health coverage (although you rarely hear them say Medicare should become privatized). Two decades ago, they touted private coverage built around managed care plans. But when managed care didn’t control costs, they started promoting plans that have high deductibles, coupled with tax-preferred savings accounts that people could use for their out-of-pocket expenses.

In the campaign of 2008, McCain proposes to go even further. He wants to eliminate the tax exemption workers get for the health benefits their employers provide. In its place, he would enact tax credits of $2,500 for individuals and $5,000 for families to help them buy insurance on their own.

While the decades-old system of employer-sponsored health insurance has its shortcomings — many small businesses can’t afford to offer it — killing the tax exemption will lead to a stampede of large employers discontinuing their more affordable, group health plans. Those comprehensive plans cost more than $12,000 a year for the average family; with a tax credit of just $5,000, they’d be left to find $7,000 a year to buy comparable coverage. Put simply, the tax-credit scheme won’t work.

The McCain plan also banks on a vague promise to work with the states to come up with plans that would cover the millions of Americans denied coverage because of pre-existing medical conditions. Not surprisingly, the private market doesn’t want these individuals. They are too risky to profits. So these patients will have three choices under the McCain plan — pay exorbitant premiums, buy a plan with minimal coverage or go without. Again, it won’t work.

Obama, on the other hand, would stop insurance companies from risk-rating individuals. He would create a new government-subsidized plan that would take in as many as 30 million Americans (almost as many as Medicare has now) that would spread the risks widely so that no one is discriminated against because of health status. So the Obama plan, unlike McCain’s, would significantly lower the barriers to affordable health insurance for most Americans now denied it or who have been priced out of the market.

In addition to being more radical, the McCain plan could be more costly in the long run than what Obama proposes. Economists studying both plans projected that over a 10-year-span there was far more efficiency in Obama’s $1.6 billion proposal — even with additional government spending — than McCain’s plan, which would cost taxpayers $1.3 billion. (The Brookings Institution Tax Policy Center estimated earlier this month that McCain’s plan, on a per capita basis, was seven times more expensive than Obama’s at covering the uninsured.)

Realistically, neither proposal is likely to be passed unchanged by a new Congress next year. But Obama’s vision for coverage offers a much better chance of fixing a broken system.

• Mike King, for the editorial board (mking@ajc.com)