McCain Health Care Proposal Sucks

Anyone who has analyzed John McCain's health care proposal knows that the numbers don't work and if you lose your employer paid health care coverage - something the McCain plan might prompt - there is no way in which decent coverage can be purchased with the tax credit McCain is offering. I know - I review the costs of coverage for my firm's plan every year. Here are some highlights from CNN that look at the consequences of McCain's plan which is definitely a case of voodoo economics if there ever was one:

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Under McCain's plan, employees would get taxed on the value of their health insurance, which on average costs $12,680 per year for a family, according to the Kaiser Family Foundation. Workers pay an average of $3,354 in premiums, while their employers cover the rest.

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Most employees have their premiums deducted from their paychecks without paying tax on them. So, if you make $50,000, you are likely paying tax on only $46,646 of income. Under McCain, your taxable income would rise to $59,326. If you were in the 25% tax bracket, it would mean an additional $3,170 in taxes.

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But this increase would be knocked back by the $5,000 tax credit. So in the end, you'd actually have $1,830 to put in a health savings account, which could be used to cover premiums and other medical expenses.

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That is until the other shoe drops:

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"If companies know their employees have the tax credit, it relieves them of the burden of providing coverage," said Sara Collins, who directs a health insurance program at the Commonwealth Fund. McCain's plan "moves people out of the employer system and to the individual market."

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Experts, however, fear that eliminating the tax advantage of employer-based coverage would prompt younger, healthier workers to leave their office plans. If that happened, costs for the remaining workers could skyrocket. Companies may drop coverage altogether.

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Some 74% of companies said that eliminating the tax exclusion would have a "strong negative impact on their workforce," according to a September survey by the American Benefits Council. Estimates vary, but the Tax Policy Center estimates that 20 million people would lose their employer-based coverage by 2018. Roughly the same number would gain insurance through other means. But, overall, McCain's plan would do little to reduce the number of uninsured.

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Also of concern, experts say, is the fact that the $5,000 tax credit would be indexed to inflation. As a result, it would not keep up with the swiftly rising cost of health care, which was soaring as much as 13% a year in the middle of this decade.