Ooops!
Doug Holtz-Eakin explains why McCain’s plan won’t cause young and healthy workers to drop out of group plans:
Younger, healthier workers likely wouldn’t abandon their company-sponsored plans, said Douglas Holtz-Eakin, McCain’s senior economic policy adviser.
“Why would they leave?” said Holtz-Eakin. “What they are getting from their employer is way better than what they could get with the credit.”
In other words, John McCain is promising to make your health care worse! Ooops!
I’m actually not sure if this is a “Kinsley gaffe” (where you accidentally tell the truth) or an effort at spin so desperate that he wound up pleading to an even worse offense than McCain was accused of. The individual market for health insurance really does suck. Nevertheless, it really might be more attractive to young and healthy workers — especially to arrogant and somewhat irrational ones. All things considered, it’s a bit hard to say. But one can say soberly that either McCain’s plan would cause people to drop out of the system and create serious problems for older workers, or else that might not happen because the individual market that McCain wants us to slowly shift to is actually so terrible that even the youngest and healthiest workers will resist it with all their might.
30 Responses to “Ooops!”
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October 28th, 2008 at 2:05 pm
So, in other words: under McCain’s plan, individual health insurance will go from “crappy and expensive” to “crappy and subsidized by tax credit.”
Individual coverage is crappy and expensive because individuals have no bargaining power, so McCain’s solution is to have the government foot part of the bill, rather than let individuals purchase insurance as a group. And the tax credit will be less and less useful every year if it’s tracked to the CPI, since the cost of health care is rising at a rate far above that of most goods.
It’s the least efficient solution imaginable.
October 28th, 2008 at 2:10 pm
In some ways, I wish McCain’s plan would go further and completely ban employer based insurance. If everyone had to deal with the individual market, there would quickly be improvements to the individual market. If the majority of voters faced what I face, the movement for reform would be unstoppable. Yeah, it would suck for a few years, but there would be great improvements in the long run. And hey, maybe even I could get insurance then. Obama’s plan is certainly an improvement, but I wonder whether the pre-existing condition changes will actually pass Congress. Those of us caught up in it don’t constitute a majority yet.
October 28th, 2008 at 2:18 pm
But at least it’s not (shudder) socialistic!
October 28th, 2008 at 2:21 pm
If I understand McCain’s plan correctly, the tax deduction for employer-sponsored plans will be eliminated. What this means is that the payroll deduction for your health care will be post-tax rather than pre-tax on your pay stub. That’s the first huge hit.
I also *think* that employers will no longer be able to deduct health care costs as a business expense. So for a typical business plan in which the costs are shared by the employer and business, the employee gets hit on his taxes, and the business can no longer deduct the cost of the business’ share of the premium.
Basically employers will no longer have any financial incentive to provide insurance and so why would the bother?
October 28th, 2008 at 2:27 pm
“Basically employers will no longer have any financial incentive to provide insurance and so why would the bother?”
Some still will provide it. Some employers actually think that treating their employers well is a good thing. Not many, but some.
October 28th, 2008 at 2:31 pm
@Kent: If that’s true, then the intent can only be to drive everyone into the individual market in a typically underhanded way. (The only way these “conservatives” can sell their wacko ideas to the general public is to disguise them.) Now fostert might be right in saying that that will force improvements in that market, but since demand is rather inelastic and the market tends to respond slowly, in the short run a good many of us will be either incurably ill or dead (I am at the age when things start to wear out, and without Medicare I would be in serious trouble.)
Isn’t it ironic, to say the least, that those who find “Darwinism” most abhorrent are often the very same whose economic ideals are Darwinist to the red-in-tooth-and-claw core?
October 28th, 2008 at 2:32 pm
This is actually shockingly bad.
October 28th, 2008 at 2:34 pm
Holds-Eekin is as much an embarrassment to the McCain campaign as his V/P pick.
Clueless.
October 28th, 2008 at 2:39 pm
Some employers actually think that treating their employers well is a good thing. Not many, but some.
In my estimation, the teat that produces the milk of human kindness in America has been squeezed dry–well beyond dry, in fact–in the last twenty years. For many, if not most, employers, it’s become a choice between “treating their employees well” and “remaining in business.”
October 28th, 2008 at 2:40 pm
Silver linings, folks.
McCain’s health plan is horrible. It drives towards higher cost and lower coverage, which is just about the worst place it could go (unless you are an insurance company).
BUT, there is zero chance for his plan to become law in the near future. In the unlikely event McCain should win the Presidential election, he’s going to be up against a heavily Democratic Congress. And don’t you just know Sen. Clinton is chomping at the bits at the prospect of tearing someone else’s health care plan to shreds on the Senate floor. Part “best served cold,” part “like a woman scorned.”
October 28th, 2008 at 2:44 pm
Strangely, Ezra Klein basically said the same thing:
“First up, Doug Holtz-Eakin explaining why his candidate’s health care plan won’t lead to an exodus of young folks from the system:
Younger, healthier workers likely wouldn’t abandon their company-sponsored plans, said Douglas Holtz-Eakin, McCain’s senior economic policy adviser.
“Why would they leave?” said Holtz-Eakin. “What they are getting from their employer is way better than what they could get with the credit.”
Oops. This is what we call a Kinsleyan gaffe: He shouldn’t have said it because it’s oh-so-true.”
Matt copying Ezra or vice versa?
October 28th, 2008 at 2:45 pm
Let’s ignore whether you’re for or against universal health care. Do you honestly feel healthy, young, single and poor individuals should have to spend the same or similar amounts on health care as older people? Obama’s plan proposal to increase the size of risk pools in order to bring down costs is based on the young spending more now and less later than they would under a free market. Shouldn’t even a paternalistic system try and give the young more disposable income when they need it so they can afford a house and start a family?
October 28th, 2008 at 2:56 pm
I think what is being overlooked is that employers are going to use this as rationalization to get rid of health plans.
They’ll say “Hey dude, take your 5k tax credit and since I’m not paying your premium anymore, I’ll give you a few grand more in your paycheck and you can go out and be a smart health-care consumer from now on!”
Oh … and good luck next year when your premiums go up 30 percent. And the year after that. Don’t expect me to give you another raise to cover it.
October 28th, 2008 at 3:06 pm
Does anybody else suspect, as do I, that the only effect McCain’s plan would have is that premiums for insurance in the individual market would increase by roughly $5,000?
October 28th, 2008 at 3:10 pm
fostert makes a good point about employers’ not having incentive to furnish health insurance. That’s the next logical step to a better system: uncouple health care from employment (except for worker’s compensation). Most people don’t know, but part of Bush’s agenda included eliminating the employer’s portion of health insurance premiums as a business expense. Thanks to other political train wrecks this one never left the station, but it’s buried somewhere in the White House website.
Employees with “good” employer-provided plans have little appreciation for the real costs of health care. Only when COBRA rears it’s ugly head does reality set in. (Boy, was that an appropriate acronym, by the way.)
If it is to have any meaning, universal care wil have to make provision for unemployed people as well as those able to pay only a meager amount toward costs.
October 28th, 2008 at 3:17 pm
When McGOP and company talk about health care they are thinking about a stream of dollars.
When I talk about health care I am talking about medicines and professional skills that help me keep or get healthy.
October 28th, 2008 at 3:23 pm
” Do you honestly feel healthy, young, single and poor individuals should have to spend the same or similar amounts on health care as older people?”
That’s not what the question is. The question is whether the healthy and young should be the only people (aside from the rich) who can get health care at all.
To put it another way, young people should pay more for car insurance than adults, but that doesn’t mean it should be functionally impossible to get car insurance until you’re 30. That’s what our health care system is like now, except the other way round.
October 28th, 2008 at 3:44 pm
i worked for a healthcare company and about 90% of my family works for one of the big three private companies
they’re kind of in a panic over the idea of a mccain healthcare plan… if it works like he said its going to work it would cause insurance costs to skyrocket. companies have no incentive (other than good will) to keep the employer plan… and they won’t (the whole greedy thing and costs, etc.). If a chunk of companies pull out all of a sudden, it forces the healthcare company to push the cost of individual insurance up ridiculously high.
I guess in theory that if you have more ppl with private insurance it will spread the risk and lower the cost but that’s not the projected forcast.
yikes
ps – can someone give an update on the polls? gallup said 47-45? and a bunch of gop folks are claiming pa for mccain? *so confused*
October 28th, 2008 at 3:54 pm
“Shouldn’t even a paternalistic system try and give the young more disposable income when they need it so they can afford a house and start a family?”
Well, that’s a good goal, but the problem is health care is essentially a zero-sum game. If young people aren’t in these large risk pools, then the pool gets a lot riskier, and everyone else in it pays more.
You can discuss whether the burden carried by various age groups is currently unbalanced, but I’m of the opinion increasing health care costs on those less healthy is probably a non-starter.
#18: FiveThirtyEight.com. PA polls from the past two weeks: O+13, O+7, O+12, O+9, O+11.7, O+8, O+10.4, O+15. But yeah, “GOP folks” should have us worried. As for Gallup, his old model has a 5-point difference from both registered and his other likely voter model. Essentially if no young or minority voters show up, it’s 47-45. Take that with whatever size canister of salt you feel appropriate.
October 28th, 2008 at 6:08 pm
Re: The individual market for health insurance really does suck. Nevertheless, it really might be more attractive to young and healthy workers
I can testify that this is true. In 2001-02 I paid Cobra at a rate of $180 a month to continue my former group coverage after I became self-employed. When the Cobra period ended I converted the coverage to an individual policy, hence, the same benefits. The new rate was just $93 a month. (I was 35 and in a very good health.)
Re: they’re kind of in a panic over the idea of a mccain healthcare plan
Yes indeed. Large health insurers vastly prefer the standard quo. They like large group policies, which are easier and more profitable for them too. Only a handful of mid-sized companies, practicing agressive cherry-picking and benefits denial, are in favor of McCain’s plan.
October 28th, 2008 at 6:11 pm
Re: a bunch of gop folks are claiming pa for mccain?
There is not a single reputable and non-partisan poll which shows anything but a double digit lead for Obama in PA. I have not even heard of a partisan poll that puts McCain within the margin of error there. Your GOP folks are delusional– probably like good old K-Lo on NRO who spent the run-up to the election in a frenzy of repeating “Santorum will win! Santorum will win!”
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