NCPA - National Center for Policy Analysis


July 30, 2008

Despite the campaign rhetoric surrounding Barack Obama's health care plan, most health policy analysts believe that John McCain is proposing the most fundamental health care reform, says John C. Goodman, president of the National Center for Policy Analysis.

Right now the federal government encourages private health insurance primarily through the tax system -- handing out more than $200 billion in tax subsidies every year.  Obama would leave this system largely intact.  McCain would completely replace it with a fairer, more efficient system with a much better chance of insuring the uninsured and controlling health costs at the same time.

  • Under the McCain plan, employers would no longer be able to buy insurance with pretax dollars.
  • These payments would be taxable to the employee, just like wages.
  • However, every individual would get a $2,500 credit (and every family would get $5,000) to be applied dollar-for-dollar against taxes owed.

The McCain plan does not raise taxes or lower them.  Instead, it takes the existing system of tax subsidies and treats everyone alike, regardless of income or job status.  All health insurance would be sold on a level playing field under the tax law, regardless of how it is purchased.  The impact would be enormous, says Goodman:

  • For the first time, low- and moderate-income families would get just as much tax relief as the very rich when they purchase health insurance.
  • People who must purchase their own insurance would get just as much tax relief as those who obtain it through an employer.
  • Whereas Obama would continue the current practice of giving the vast bulk of federal help to the rich (through tax subsidies) and the poor (through spending programs), the McCain tax credit would give the most new tax relief to the middle class.

Source: John C. Goodman, "McCain is the Radical on Health Reform," Wall Street Journal, July 30, 2008.

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