McCain's Health Plan Belongs in a Bedpan

The Arizona senator's proposal could dissuade poorer families from signing up for insurance and backfire on those with pre-existing conditions.
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On Tuesday, Sen. John McCain (R., Ariz.) added some clarification to his health care proposals, mostly making an effort to cover individuals with pre-existing conditions such as the melanoma McCain had removed several years ago.

McCain mostly touts freedom of choice in his proposal. Unfortunately, health care choice may mean fewer people can afford health care and could end up not being covered at all. This could be a disaster for businesses and individuals.

McCain's plan presents a stark contrast to the Democrats'. Both Sen. Hillary Clinton (D., N.Y.) and Sen. Barack Obama (D., Ill.) have proposed plans coming close to universal coverage, and they plan to pay for them with tax hikes on those in the highest tax brackets. The Democrats would augment the present system by creating government programs. McCain, on the other hand, proposes a "free market" plan, which would bring drastic change of another kind.

The present health care system is far from perfect. Most people automatically enroll in health care and receive coverage from their employer. Employer-based tax subsidies make this possible.

McCain's plan puts an end to this subsidy in favor of a $2,500 individual rebate and $5,000 per family. According to

estimates

by the McCain campaign, this would save taxpayers $3.6 trillion over the next decade. Consumers could choose any plan in the open market.

The plan creates two problems. First, everyone would be responsible for finding their own health care. No longer would you simply fill out forms with your firm; rather, you would have to search out health care plans. This means consumers would have to spend more time researching plans.

Severing this relationship between employer/employee also strains health care firms, increasing a need for more customer service. We learned from

recent quarterly

reports from health care companies like

Wellpoint

(WLP)

and

Humana

(HUM) - Get Report

that they're struggling in a competitive environment with rising health care costs, while

United Health Care

(UNH) - Get Report

suffered because of poor customer service.

Second, individuals would find they pay more for health care insurance. The Kaiser Family Foundation released of

study

of health care costs for 2007 showing premiums for individuals are $4,479 per person and $12,106 per family of four. Consumers would have to make up the difference.

Worse, big questions need to be answered. When would you get a rebate? Would you have to wait a year, until you file your income taxes? What if you can't afford the premiums because you live paycheck to paycheck? A cash crunch could force many not to purchase health care. This could add to the 47 million Americans who lack health care coverage, many of whom burden taxpayers by reneging on emergency-room bills.

The McCain campaign did not respond to emails asking for additional information. His plan has some similarities to a proposal made by President Bush, which died without much discussion in Congress.

Fewer people buying insurance puts pressure on insurance companies. How would health care companies make a profit? It is possible they would become more selective in their coverage and decide not to cover people with pre-existing conditions. McCain deals with this by creating a small subsidy to help them. The total expenditure would be approximately $7 billion, which might cover 5 million to 7 million people at best, according to McCain's campaign.

Elizabeth Edwards

attacked

McCain's health care plan in the media. She said that McCain's plan grossly underfunds those with access issues, and she continued: "We're talking about the most radical plan ever suggested by a presidential candidate." Edwards had previously panned McCain because neither he nor she could get coverage with cancer under his plan.

Much of McCain's plan rests on driving down costs through competition. It might work. But as I outlined here, it could prove painful for both consumers and insurers in the process. His campaign will have to provide a clearer picture of the benefits for Americans to take it seriously.