Update2: The Great Health Care Debate

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With as much as we have been discussing health care policy here lately, I’m thinking we should re-name this blog “Bedside Manner.” But here’s a point that McCain senior policy adviser Douglas Holtz-Eakin, in an e-mail to me, suggests we need to underscore:

Just wanted to make sure that you understood that there is nothing in McCain’s plan that forces an individual to give up their employer-sponsored insurance. In particular:

Nothing changes for the employer. All compensation (wages, health, life, disability, etc.) was deductible from business taxation before; it would remain so after. Accordingly, since employers offer an array of wages/benefits to attract the workforce they need to compete, nothing will change on that front — including the use of health insurance as a recruiting/retention tool.

For the typical ESI recipient — $12,000 policy — nothing changes. The tax liability on the policy ($12,000 x .35) when insurance is taxed as compensation is $4,200; this will be immediately offset by the credit of $5,000. In short, if they want to stay with the current plan, it just means a lot of computer entries on the pay stub. No change and if they are happy they stay with what they have.

Understood. There is nothing in the plan that forces employers to drop their coverage, and in industries where there are union contracts, or where companies are in heavy competition for the best workers, a good health plan is likely to remain part of the compensation mix. But at a time when many employers are already scaling back, raising the cost of and even dropping health coverage for their workers,* many experts say that the kind of system envisioned under the McCain plan would encourage even more employers to get rid of health coverage.

Which, by the way, is not necessarily a bad thing. The current system of getting your health insurance as a fringe benefit from your employer does not make a lot of sense economically, and is one of the things that has given rise to the many problems–especially rising costs–in the health care system today. The real question is whether what would replace it is better or worse than what we have now. And that is what this long-overdue debate should be all about.

* Could we see a show of hands out there from those of you who are feeling it? Mine would go up, if I weren’t typing.