Health Affairs has released two papers offering critical analyses of the candidate's health care plans today, and one paper outlining what a synthesis approach would look like. The first, written by Thomas Buchmueller, Sherry A. Glied, Anne Royalty, and Katherine Swartz, examines the cost and coverage implications of McCain's proposal. "Senator McCain's health plan has three central features," they write. "Withdrawing the current tax exclusion of employer payments for employer-sponsored coverage (in other words, taxing premiums paid by employers), introducing a refundable individual health insurance tax credit, and deregulating nongroup insurance by permitting the purchase of policies across state lines." The big mover here is is the tax increase on employer-based health care, which is achieved by ending its deductability. There are two things worth knowing about the way the exclusion works now: First, it makes health care much cheaper for employers. Second, to qualify for the tax exclusion, you can't discriminate among sick and healthy workers, nor among young and old workers. In general, you might expect this to drive out the young and healthy. But it doesn't, because the savings from deductability still make employer-based insurance cheaper and more comprehensive than what they could purchase on the individual market. "Eliminating the tax exclusion would greatly reduce the number of people who obtain health insurance through their employers," write the authors. "This decline would be driven by three factors: the effective price of employer-sponsored coverage would increase, the nondiscrimination rules would no longer apply, and low-risk employees would have less incentive to remain in employer-sponsored groups...the elimination of the income tax preference for employer-sponsored insurance would cause twenty million Americans to lose such coverage." Italics, as you might imagine, are mine. But this is the main fact worth knowing, and repeating, about John McCain's health care plan: Its first-order effect would be to take employer health insurance away from 20 million Americans who currently have it. And this estimate is on the low-end. The authors write that it only looks at what employers would do in response to the new tax rules. It does not examine "the number of low-wage workers who might lose employer-sponsored insurance when employers are no longer bound by the nondiscrimination rules, nor do they capture the impact of breaking up existing risk pools." In other words, 20 million plus will lose their employer-based health insurance.
