Monday, November 03, 2008

BO's Mediscare

BO is demagoguing McCain's health care reform proposals, running ads in swing states saying that McCain plans to tax employer-provided medical insurance and that a McCain administration will need to cut $882 billion from Medicare over the next decade to fund his health reforms. Obama pushes further on the stump, claiming a 20-percent Medicare benefit cut next year. “You’ll pay more for your drugs; you’ll receive fewer services; you’ll get lower quality care… it ain’t right.”

The figure comes from a partisan action fund led by the head of BO’s own transition team — they would have gotten just as credible a figure from Bill Ayres, but no one can find him these days. describes the ad as a “among the biggest whoppers of the whole campaign.”

What the BO attacks fail to mention is that McCain's proposals level the paying field by refunding $5,000 to every family, so that everyone, including those whose employers do not provide medical insurance, have the opportunity to buy insurance with untaxed income. As the Washington Post noted: "By most independent calculations, the McCain plan will leave most taxpayers better off in strictly financial terms." Even the liberal leaning Tax Policy Center, agrees that the McCain proposals will result in a net savings of $1,200 for the average family.

In the last debate, BO pointed out that $5,000 is not enough to insure the average family. Biden called the shortfall "The ultimate bridge to nowhere." Strong rhetoric, but if you bother to read McCain's proposal rather than just listen to BO attack it, you will understand that the tax credit is not intended to pay the entire cost of insurance, but simply to replace the value of the employers' tax advantage. In fact, the Lewin Group criticized the McCain plan as being overly generous for middle Americans, leaving them with a robust tax reduction.

In the final debate, Obama claimed that 20 million Americans will lose employer-coverage under McCain’s plan. As his ad notes, the plan will end up “raising costs for employers who offer health care, so your coverage could be reduced or dropped completely.” But McCain’s plan doesn’t touch the employer deduction on health benefits (including the payroll tax) — which makes it difficult to see why companies would suddenly ditch their insurance policies. Employers offer health insurance for the competitive advantage in hiring the best people, not for the tax deduction. That said, it is true that a commentary in Health Affairs did speculate that some 20 million Americans would stop getting employer-based coverage. It also suggested that 21 million would buy on the market. Actually, every estimate predicts that the McCain plan will lead to a drop in the number of uninsured: by 5 million (the Tax Policy Center), 21 million (the Lewin Group), or 27.5 million (HSI). The last two studies, incidentally, conclude that more employees will lose coverage under the Obama plan.

The primary advantage of McCain's plan over BO's is that it keeps competition in the healthcare system, which promotes better quality care, supply to meet demand, and lower prices. BO's plan, on the contrary, would remove market forces by denying individuals the right to pick the best doctor or best insurance for their needs or to compare costs and buy the coverage which offers the best value. In every country where this has been tried, it results in severely reduced quality of care, inadequate availability of care, all of which leads to rationing and absurdly long waiting lists to see a doctor. As they say, there are few maladies which are not cured by a six month wait.

As Jason Furman, now economic policy director of the BO campaign, noted in February: “The most promising way to move forward in all three dimensions — coverage, cost, and long-run fiscal situation — is to replace the employer exclusion with a tax credit” and "we could scrap the current deduction altogether and replace it with progressive tax credits that, together with other changes, would ensure that every American has affordable health insurance." That is exactly what McCain proposes.

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