Daily Policy Digest

Health Issues

September 29, 2008

REFORMING THE U.S. HEALTH CARE SYSTEM

Of the proposed health care reforms, Sen. John McCain's (R-Ariz.) plan would completely replace the current system with a fairer, more efficient one, providing a much better chance of insuring the uninsured and controlling health costs, says John Goodman, President of the National Center of Policy Analysis.

Currently, private health insurance is subsidized -- to the tune of $200 billion a year -- by excluding employer-paid premiums from income and payroll taxes.  McCain's plan would replace this system with a uniform subsidy applicable to all insurance, regardless of how it is purchased, says Goodman.

McCain's plan would level the playing field:

  • Employers would no longer be able to buy insurance with pre-tax dollars, and their premium payments on behalf of workers would be taxable income to the employees, just like wages.
  • However, every individual would get a $2,500 credit ($5,000 per family) to be applied dollar-for-dollar against taxes owed.
  • People who must buy their own insurance would receive as much tax relief as those who obtain employer-sponsored insurance.

A national marketplace would be created, helping the middle class:

  • People would be allowed to buy insurance across state lines and under more consumer-friendly regulatory regimes.
  • Thus, creating a competitive, national market for health insurance.
  • This would provide much more help to low- and average-income families, because they would receive just as much tax relief to purchase health insurance as the very rich.

Moreover, McCain's proposal would encourage cost control:

  • It would subsidize the core insurance that everyone has, leaving them free to purchase additional coverage with after-tax dollars.
  • Everyone would have an incentive to compare the value of extra health benefits to the value of other things money can buy.

Source: John C. Goodman, "Reforming the US Health Care System: McCain's plan shows more promise than Obama's," Fraser Forum, September 2008.

For text:

http://www.fraserinstitute.org/commerce.web/product_files/ReformingUSHealthCareSystem.pdf

For more on Health Issues:

http://www.ncpa.org/sub/dpd/index.php?Article_Category=16