John McCain touts his reputation as a maverick, willing to buck his party when it’s the right thing to do. Barack Obama says McCain isn’t much of a maverick, that he follows President Bush’s lead the vast majority of the time.
On some aspects of health care, though, McCain really is a maverick. The central example is McCain’s plan to tax employer-provided health care benefits. I’m sure McCain didn’t intend this, but he’s bucking pretty much the whole business community on this one. According to the New York Times (Business Cool Toward McCain’s Health Coverage Plan) the US Chamber of Commerce, Business Roundtable and National Federation of Independent Business all think this is a bad idea.
The business leaders forecast that Mr. McCain’s free-market approach would impose particular burdens on small businesses and old-line manufacturers that are already struggling.
“To some in the business community, this is very discomforting,” said R. Bruce Josten, executive vice president for government affairs at the Chamber of Commerce. “The private marketplace, in my opinion, is ill prepared today with an infrastructure for an individual-based health insurance system.”
Josten has it about right. The employer-sponsored system isn’t ideal. In particular it hides the cost of health care from employees and provides an unfair tax advantage to those who receive health insurance through work versus those that have to find it on their own. But at least the employer-sponsored system creates insurance pools, which allow those with pre-existing conditions to enroll on favorable terms and provides economies of scale that can be exploited in distribution and administrative costs.
Moving people from the employer-sponsored market to the individual market, as McCain’s plan would do, is problematic, even with the $2500-5000 tax credit he proposes. Administrative and distribution costs are higher for individual plans because it’s less efficient for insurers to serve individuals than companies and because insurers end up spending money to avoid people who are bad risks.
McCain would like to “turn the page” on the financial crisis and focus on something else. Considering the unpopularity of the McCain health care plan, I don’t think that something else will be health care.October 8, 2008