, , , , ,

Crossposted at EENR Blog.

A number of commenters have made the point that John McCain’s health care plan is horrible policy, but on such an important issue, it’s a point that bears repeating. Obama and Clinton have minor differences on health care between them compared to the chasm that separates their essentially good plans from McCain’s terrible ideas, which are really just out of the George W. Bush playbook.

McCain’s plan has two main features. The first is a refundable tax credit worth $5,000 per family to defray the costs of purchasing health insurance coverage. This would be offset in the federal budget by cancelling the tax deduction employers get for providing health care benefits to employees. In other words, the federal government would provide financial incentives to end employer-based coverage and replace it with a system in which the burden is entirely on each individual.

Elizabeth Edwards takes this proposal down nicely. She points out that on average, health insurance costs an American family $12,000 per year. But most American families and individuals have plans that are provided through their employer, who by virtue of their larger size are able to negotiate lower insurance rates than individuals looking for coverage on their own. The $5,000 the family gets from the government will not make up for the $9,000 that the employer contributes yearly on average to an employee’s premiums, and the individual will pay a larger premium because they don’t have the bargaining power of larger numbers.

More below the flip.

It appears McCain was also sensitive to the criticism that he would leave out those who, just like John McCain, have preconditions that would lead insurers to deny coverage or charge exorbitant rates. So he is proposing to set up a “Guaranteed Access Plan”, state-run high risk pools. States would pool all citizens with health conditions that would price them out of normal coverage, then bargain with private insurers to get those citizens covered. It sounds good, except as Jon Cohn points out, those pools already exist in 30 states (Missouri has such a pool, MHIP), and they are expensive and poorly regulated. For up to a year, most people aren’t even covered for the conditions that got them blocked from regular insurance in the first place, so they have to pay out of pocket for care alongside their high insurance premiums. Cohn runs through the case of Elizabeth Edwards, if she were in such a pool:

It turns out that North Carolina, where Edwards lives, doesn’t actually have a high-risk pool in operation right now. (It hopes to launch one next year.) But neighboring South Carolina does. Pollitz was able to track down published figures with the rates the South Carolina pool would charge a 50-year-old man. (Edwards, a 57-year-old woman, would actually pay more.) And according to those figures, Edwards’ most cost-effective option would be to choose a plan that had monthly premiums of $867 for six months, followed by $693 every month thereafter.

That plan comes with a $1,500 deductible; in other words, every year Edwards would have to pay $1,500 in medical bills before the insurance kicked in. After that, she’d have to deal with the cost-sharing until she had spent another $3,500 out of her pocket.

If you do the math, you’ll see that means Edwards would end up paying more than $14,000 a year in insurance and out-of-pocket medical expenses. (At least for now. The rates go up in July.)

And for the first year, Edwards’ cancer treatments wouldn’t be covered, so she would have to pay for all medicine and treatment – potentially $100,000 – out of pocket. I suppose it’s better than being uninsured altogether (she would be covered for treatment if she had the flu, or a broken arm), but not by much.

There’s another insidious side to McCain’s plan. Some states actually regulate insurance companies more strictly than the federal government, but under McCain, the looser federal regulations would supercede all state regulations. For example, in states that have passed a ban on cherrypicking the insured based on pre-existing conditions, the federal law would repeal the ban.

To sum up, under McCain, you would stop getting benefits at work and start paying more for coverage on your own. If you have a medical condition when your employer drops coverage, you might be lucky enough to get covered, but you’ll have to pay a lot more for it, and pay out of pocket until your new, expensive coverage sets in. Does any of this sound like a good idea?