NCPA - National Center for Policy Analysis


September 5, 2008

Most health policy analysts believe that Sen. 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 primarily uses the tax system to encourage private health insurance -- handing out more than $200 billion in tax subsidies every year.
  • Sen. Obama would leave this system largely intact.
  • Sen. McCain would completely replace it with a fairer, more efficient system with a much better chance of both insuring the uninsured and controlling health costs.

Under the McCain plan:

  • Employers could no longer buy insurance with pretax dollars.
  • Such 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 or lower taxes.  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, when purchasing health insurance low- and moderate-income families would get as much tax relief as the wealthy.
  • People who purchase their own coverage would get the same tax relief as those who obtain it through an employer.
  • Whereas Sen. 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, "The John McCain Health Plan," National Center for Policy Analysis, Brief Analysis No. 629, September 5, 2008.

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