If Senator John McCain becomes U.S. president he plans to give each American family $5,000 to pay for health insurance premium costs in the individual market. Individuals would get $2,500 for the same use.
How does McCain propose to pay for this? In part, by revoking the tax deductibility of workers’ health benefits and by making cuts to Medicare and Medicaid. Even with these provisions, however, The Tax Policy Center estimates McCain’s plan will run an estimated $1.3 trillion short in funding over the next ten years.
In McCain’s “Health Care Action” television ad, he says, “The problem with health care in America is not the quality of health care, it’s the availability and the affordability. And that has to do with the dramatic increase in the cost of health care.”
McCain is correct in saying that rising costs are our greatest
challenge, but will $5,000 make health care for families more
affordable or available? Probably not given that McCain’s plan does not
include a provision to increase the tax credit with the rising costs
insurance. And according to the Kaiser Family Foundation, the steep increase in health insurance premiums isn’t going to decline anytime soon.
Kaiser reports that families currently pay $12,680 each annually for
health insurance. That’s a 107% increase since 2000. Following this
trend, families’ annual premiums are likely to be $15,680 or more in
three years. The $5,000 tax credit certainly won’t compensate families
whose employers decided to stop offering coverage.
What about availability? McCain says his plan would promote
competition by allowing insurance companies to sell products across
state lines. Health insurance is largely regulated by states, thus
state law dictates most insurance mandates and consumer protections. An
unintended (or intended depending on your point of view), is that
insurance companies may flock to states with lax health insurance laws.
This won’t make it any easier for people with pre-existing conditions
or those beyond middle-age to obtain coverage in the individual market.
Looks like the $5,000-solution won’t be enough to solve the U.S. cost problem and improve health care.