I just read an opinion article in the WSJ about how John McCain has a better health care reform proposal than Barack Obama. The article is written by Dr. David Gratzer, who is a senior fellow at the Manhattan Institute think tank. Since health care has become so politicized, it’s not surprising that conservative and liberal groups have such wildly opposing viewpoints on how to fix the system. And supporters on each side have found ways to justify their party’s views – more free market or more government intervention – regardless of the actual long term effectiveness of the proposal. Especially in an election year, it’s tough to separate politics from everything else and look at proposals objectively. And the Manhattan Institute is a market-oriented, conservative group; it’s natural that they would be in support of McCain’s health care reform proposal, since the essence of his plan is to expand the “free-market” health care system.
McCain’s plan is to give individuals a tax credit for purchasing health insurance, rather than reserving this benefit only for employers providing health insurance to their employees. On the surface, I love this idea. My family has individual health insurance, but since we’re not self-employed (we are employees of our corporation), we can’t deduct the premiums we pay for our health insurance (currently $5160/year, going up to $6000/year as of next month). Our HSA allows us to deduct money that we put into it to cover health care expenses, but that money cannot be used to pay our health insurance premiums. So for us, a $5000 tax credit to cover health insurance premiums would be sweet. Of course it helps that we already have individual health insurance, are used to the high deductible, rarely use our coverage, and have only a few pre-existing condition exclusions on our policy.
For middle class people with significant pre-existing conditions, obtaining individual health insurance is fraught with difficulties and can be impossible depending on the medical conditions in question. The coverage is very different too. If you’re used to a $500 family deductible on your group health insurance policy, you might be in for a rude awakening when you go shopping for individual health insurance, since out of pocket expenses tend to be higher on individual plans. And if you’d like to have a baby, you’ll want to start saving now, because most individual health insurance carriers don’t cover maternity at all, and those that do charge a hefty sum to do so. (in Colorado, there are only three major carriers – Time/Assurant, Rocky Mountain Health Plans, and United HealthCare – that still offer maternity coverage on individual health insurance policies).
Gratzer’s article mentions the benefits of portability and labor mobility that would be obtained by moving health insurance away from group policies and towards more individual, consumer-purchased policies. On this position, I agree. Having health insurance tied to an employer does impede the possibility of switching jobs or becoming self employed, especially for people who have pre-existing conditions and would find it difficult to obtain coverage in the individual health insurance market.
But individual health insurance would need a major make-over before we’re ready to switch from a country where most people are covered by employer group policies. Don’t get me wrong – I love the individual health insurance policy my family has. But we almost never use it. Jay’s knee surgery this year was the first time we’ve ever met our deductible. High deductible individual health insurance makes perfect sense for our family. But what about middle class families who wish to have children and can’t afford to pay several thousand dollars in hospital expenses for prenatal care and delivery? What about middle class families with pre-existing medical conditions who aren’t eligible for individual health insurance, or can only qualify for a policy with exclusions on all their current conditions? Last week I wrote about how $5000 does actually go a long way towards the cost of individual health insurance in Colorado, but that was for policies with $5000 deductibles. So families would get a tax credit for the money they spend on premiums, but they would still be on the hook for $5000 in out-of-pocket expenses. For most middle class families, that is a lot of money. And for low-income families, it’s next to impossible.
So while it would be great for my family to start getting a $5000 tax credit to pay our premiums, it’s not a viable solution for a lot of Americans. A tax credit to purchase individual health insurance will benefit upper class Americans who are healthy, financially savvy, and able to save money to cover higher out-of-pocket expenses. But in order for health care reform to work, it has to work for everyone. We need a solution that spreads the cost of health care evenly across the entire population (adjusted for income, just as taxes are) and doesn’t leave large groups (like people with pre-existing conditions) to fend for themselves with no good options available.
