McCain Health Plan Has Underlying Illness

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Sen. John McCain (R., Ariz.) has promised to revolutionize the U.S. health care industry if elected president by ending the current employer-based tax subsidy and offering the subsidy instead to individuals. His plan would cost about $1.3 trillion over 10 years, according to the nonpartisan Tax Policy Center.

McCain says his plan would be revenue neutral -- so he would have to make cuts or raise taxes to pay for it. His chief policy adviser, Douglas Holtz-Eakin, says the plan would pay for itself by cutting costs. But in reality, the health care proposal could place baby boomers and seniors in danger of no coverage or substandard coverage.

McCain's health care plan would have several unintended consequences. Those people still receiving health care from their employers would have to pay taxes on those benefits. Individuals could avoid the tax by rejecting employer-based health care and purchasing their own coverage in the open market. The tax subsidy would work out to $5,000 for a family and $2,500 for an individual.

However, it currently costs much more to buy insurance. Kaiser Health Care Foundation estimates that the cost of a health care plan runs about $12,680 for a family and $4,704 for an individual for 2007, and costs are set to rise 5% for 2008. That's a significant shortfall.

McCain argues that competition would result in lower prices. He would remove state restrictions on health care, creating a national health care market where companies compete on a much larger scale. Consolidation and competition could cut some costs. However, the savings would have to be dramatic because his plan isn't adjusted for inflation or higher future health care costs.